Elon Musk considers taking Tesla private as stock jumps

Marco Green
August 8, 2018

Will be way smoother & less disruptive as a private company.

"In the future, once Tesla enters a phase of slower, more predictable growth, it will likely make sense to return to the public markets", writes Musk. He later tweeted that the only uncertainty about completing the deal is whether he can gain shareholder approval.

Musk's announcement was initially met with widespread skepticism, with many people connecting the proposed price to 420 being a common slang term for marijuana. In Musk's case, it's arguable that all investors know to be watching his tweets every second of the day. The stock, then trading at about $342 per share, shot up to $367.25, before trading was halted at 2:08 p.m. "This is not how you do it and it makes you wonder how seriously to take it", said Erik Gordon, a business and law professor at the University of MI.

The only problem? Those rumors were seeded, very publicly, by Musk himself, who announced his thoughts on Twitter ― and went so far as to set a prospective buyback price of $420 and promise he had the funding "secured".

It contained a letter from Musk sent to Tesla employees.

Tesla closed up 11 percent at almost $380 after trading resumed.

Tesla and its investors are no stranger to seeing the company's share price follow a rollercoaster trajectory. Musk explicitly notes that he does not intend to merge Tesla and SpaceX, and that the two companies will remain separate, even though the private-shareholder structure would be similar. As Twitter exploded, Tesla representatives, usually quick to answer reporters' calls, remained silent.

Tesla did not immediately respond to a request for confirmation or clarification. He clashed with analysts on a contentious call after Tesla reported earnings three months ago.

However, he concedes Musk has good reason to take Tesla off the public markets, and he's established precedent through SpaceX and The Boring Company. "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". If Musk's statements are "less than totally true", that could be "materially misleading", said Coffee, citing the SEC's Rule 10b-5, a widely used anti-fraud rule.

Wall Street jumped on the news, spiking Tesla stock from around $342 a share to a high slightly north of $370 in just 45 minutes. He went on to say he hopes all shareholders stick with the company but, if not, this is their time to exit while still making a "nice premium".

Tesla is the most valuable automaker in the United States, and Musk's fights with investors - specifically short-sellers, who profit when the stock drops - are a running Silicon Valley sideshow. The company had a market value of $58 billion as of Monday's close.

Other reports by Click Lancashire

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