Tesla confirms intention to go private, sending stock up 11%
The goal would be “creating the environment for Tesla to operate best,” Musk said in the an email to employees that was posted on the company’s website.
“As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders,” he wrote. “Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term.”
Musk also took a swipe at short-sellers, saying that “being public means that there are large numbers of people who have the incentive to attack the company.”
See also: Elon Musk explained his going-private tweet to Tesla employees with this email
The news came after Musk earlier Tuesday announced on Twitter he was “considering” taking the Silicon Valley car maker private at $420 a share. Shares were halted about one hour later for pending news, and resumed trading up about 11% at 3.45 p.m. Eastern.
Am considering taking Tesla private at $420. Funding secured.— Elon Musk (@elonmusk) August 7, 2018
Musk’s blog post was short on any details about the potential buyers, and left the door open to a potential return to markets.
“In the future, once Tesla enters a phase of slower, more predictable growth, it will likely make sense to return to the public markets,” he wrote. “I’m trying to accomplish an outcome where Tesla can operate at its best, free from as much distraction and short-term thinking as possible, and where there is as little change for all of our investors, including all of our employees, as possible.”
Earlier Tuesday, Musk also tweeted he would hope “all” investors would remain with Tesla even if it went private, and that he’d “ensure” the prosperity of Tesla shareholders. When asked whether he’d remain CEO, he tweeted “no change.”
He later tweeted that going private will “be way smoother & less disruptive as a private company. Ends negative propaganda from shorts.”
Tesla, founded in 2003, went public in June 2010, opening at $19 a share, 12% above the $17 offer price. It traded as high as $25 a share to end its first day at $23.89.
Tesla shares were up 7.4% before the halt Tuesday, and earlier in the day got a boost from news that Saudi Arabia’s sovereign-wealth fund has taken a significant stake in the company.
The largest U.S. leveraged buyout so far is the TXU Corp. deal, which closed in 2007, for $32 billion. The company, renamed Energy Future Holdings, filed for chapter 11 bankruptcy in 2014.
Musk in April tweeted a joke that Tesla had gone bankrupt amid the company’s worst month in seven years. The stock fell 5% the following day.
Tesla last week reported mixed second-quarter results, but the stock has rallied as Wall Street seized on the company’s renewed promises of profitability for the second half of the year and on Musk’s demeanor during a post-results conference call with analysts.
“Market perception of Elon Musk appears to have improved significantly from the lows following the previous conference call and recent social media activity,” analysts at Morgan Stanley wrote in a note Tuesday. “We can’t put a value on this, but it’s clearly important. The apologies and self-awareness expressed on the call triggered an immediate positive market reaction.”
Investors had called for a Twitter “sabbatical” for Musk after the CEO last month called a diver involved in the Thai cave rescue of a youth soccer team a “pedo.” Musk later apologized to the man and to the companies he leads.
Tesla’s revenue growth number, however, was artificially inflated by its adoption of a new revenue recognition rule for the second quarter that it compared with a revenue number calculated under the old rule, as MarketWatch’s Francine McKenna has reported.
Tesla shares have gained 22% this year, compared with gains around 7% for the S&P 500 SPX, +0.28% and 4% for the Dow Jones Industrial Average. DJIA, +0.50%