Elon Musk gave us all a bit of a shock earlier this month when he announced on Twitter that he was thinking about making the company private, with a share price of US$420. It didn’t last long though. Earlier today he issued a statement saying that it’s not actually going to happen.
This article was originally posted on August 25 at 4PM.
Posted on the Tesla Blog, the announcement from states that Musk’s decision to keep the company private is based on feedback from shareholders.
He goes on to say that institutional shareholders explained to him that they have internal compliance rules that would limit the amount they could invest if Tesla was to go private.
“Although the majority of shareholders I spoke to said they would remain with Tesla if we went private, the sentiment, in a nutshell, was ‘please don’t do this'”
“After considering all of these factors, I met with Tesla’s Board of Directors yesterday and let them know that I believe the better path is for Tesla to remain public. The Board indicated that they agree,” said Musk.
Will this usher in a new age where the Tesla founder will perhaps do some research or discuss things with his investors and board before tweeting? Who knows, but the guessing is what makes it fun, right?
Am considering taking Tesla private at $420. Funding secured.
— Elon Musk (@elonmusk) August 7, 2018
Musk also states that making the company private would be more “time-consuming” and “distracting” than he originally thought, and that its focus should remain on delivering the Model 3 and making the business profitable.
Considering that it was recently reported that the CEO regularly pulls 120 hour work weeks, perhaps its best he doesn’t add to the load.
What is left out of the statement is the shareholder complaint that was filed earlier this month. It stated that the original US$420 tweet was intended to drive up share prices, which would negatively impact short sellers who were betting against Tesla.
And while we can’t comment on the truth of this allegation, Tesla stock did go up by 11 per cent within minutes of the tweet going live. It did drop back down to 7 per cent relatively quickly, but I can see the shareholder’s logic here.
Musk hasn’t taken to Twitter to add anything to his statement, yet. So far he has merely rewteeted the announcement from the Tesla account.
Staying Public https://t.co/gUrAnInBOu
— Tesla (@Tesla) August 25, 2018
Here’s the full statement:
Earlier this month, I announced that I was considering taking Tesla private. As part of the process, it was important to understand whether our current investors believed this would be a good strategic move and whether they would want to participate in a private Tesla.
Our investors are extremely important to me. Almost all have stuck with us from the time we went public in 2010 when we had no cars in production and only a vision of what we wanted to be. They believe strongly in our mission to advance sustainable energy and care deeply about our success.
I worked with Silver Lake, Goldman Sachs and Morgan Stanley, who have world-class expertise in these matters, to consider the many factors that would come into play in taking Tesla private, and to process all the incoming interest that we received from investors to fund a go-private transaction. I also spent considerable time listening to current shareholders, large and small, to understand what they think would be in the best long-term interests of Tesla.
Based on all the discussions that have taken place over the last couple of weeks and a thorough consideration of what is best for the company, a few things are clear to me:
Given the feedback I’ve received, it’s apparent that most of Tesla’s existing shareholders believe we are better off as a public company. Additionally, a number of institutional shareholders have explained that they have internal compliance issues that limit how much they can invest in a private company. There is also no proven path for most retail investors to own shares if we were private. Although the majority of shareholders I spoke to said they would remain with Tesla if we went private, the sentiment, in a nutshell, was “please don’t do this.”
I knew the process of going private would be challenging, but it’s clear that it would be even more time-consuming and distracting than initially anticipated. This is a problem because we absolutely must stay focused on ramping Model 3 and becoming profitable. We will not achieve our mission of advancing sustainable energy unless we are also financially sustainable.
That said, my belief that there is more than enough funding to take Tesla private was reinforced during this process.
After considering all of these factors, I met with Tesla’s Board of Directors yesterday and let them know that I believe the better path is for Tesla to remain public. The Board indicated that they agree.
Moving forward, we will continue to focus on what matters most: building products that people love and that make a difference to the shared future of life on Earth. We’ve shown that we can make great sustainable energy products, and we now need to show that we can be sustainably profitable. With all the progress we’ve made on Model 3, we’re positioned to do this, and that’s what the team and I are going to be putting all of our efforts toward.
Thank you to all of our investors, customers and employees for the support you’ve given our company. I’m incredibly excited to continue leading Tesla as a public company. It is a privilege.
Update 27 August 08:00AM:
Over the weekend Musk responded to someone on Twitter who appears to be a small investor from Europe. They show support for Musk’s decision, stating that they would have had to cash out at $US420.
Musk responded by discussing the current rules around regulation and how that negatively impacts small investors.
This was key showstopper for me personally. Couldn’t make it happen, even through expert fiduciary SPV, without creating exotic trust structure that would prob not be accepted by regulators. Current rules have good intentions, but make wealth creation harder for small investors.
— Elon Musk (@elonmusk) August 25, 2018
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