Elon Musk details taking Tesla private, says final decision is pending

Ann Santiago
August 8, 2018

Investors betting against Tesla (TSLA) lost about $1.3 billion after a tweet from CEO Elon Musk 's verified account which mentioned taking the company private, according to estimates from financial technology firm S3 Partners.

Mr Musk's announcement was initially met with widespread scepticism, with many people connecting the proposed price to 420 being a common slang term for marijuana.

Former SEC chairman Harvey Pitt spoke up about the matter to CNBC, noting that Musk's tweet "might constitute fraud if any of the facts he disclosed are not true" or if there's any indication that his tweet was sent for the objective of boosting Tesla's stock price by soliciting investor hope.

Musk and his luxury automaker have been under huge pressure to overcome repeated delays and deliver on promises of producing 5,000 of Tesla's more affordable Model 3 cars per week. His asking price of $420 would be 22 percent of Monday's closing share price, and almost 9 percent above the stock's all-time closing high of $385.

In subsequent tweets on Tuesday, Musk said that he hoped all current investors would stay with Tesla even if it went private, and that he would be willing to create a fund to allow it.

Convertibles give bondholders the right to trade their debt for equity after shares rise over a certain set price.

In his letter to employees, Musk also pointed to pressure from short sellers as a major downside to being a public company. What do his latest tweets mean for the future of Tesla? "Our guess is there is a 1 in 3 chance he can actually pull this off", wrote Gene Munster of Loup Ventures, adding that Mr. Musk's proposed premium over Tesla's existing share price might not be enough to persuade shareholders to sell.


Going private, Musk said, would end "negative propaganda from shorts", referring to his hated short-sellers.

During a conference call in May, Mr. Musk shut down questions from analysts, calling them "boring" and spent much of the time talking to an investor who runs a YouTube channel, prompting an after-market sell-off of Tesla's shares.

Musk has frequently expressed dismay at Tesla's treatment as a public company and has clashed with regulators, critics and reporters.

Because 420 is the universal number indicating it's time to smoke some weed, it was easy to laugh off Musk's tweet as just one of his weird jokes.

Tesla shareholders would need to vote in favor of going private before the decision is finalized, Musk concluded. Factoring in $US8.8 billion ($11.9 billion) in debt, Musk's ganja-friendly target price to go private would value the company at around $US80 billion ($107.8 billion).

In his blog post, Musk emphasized that the intention was not to merge SpaceX and Tesla, a strategy that some have speculated about in the past.

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