Tracking Tesla

Billionaire entrepreneur Elon Musk confirmed on Friday that Tesla would stay a public company after  widespread market speculation over the future of one of his main entities.

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On August 7, Musk tweeted that he was “considering taking Tesla private,” sparking speculation over the potential implications of what would be the biggest corporate buyout in history.

Market watchers met the announcement with suspicion, due to the amount of capital such a move would require. A buyout of the electric car and solar power company at Musk’s proposed $420 per share is estimated to require $72 billion.

However, Musk said on August 25 that the company would remain public. 

“We fully support Elon as he continues to lead the company moving forward,” Tesla’s board said in a statement.

However, U.S. regulator the Securities and Exchange Commission (SEC) is reportedly (Wall Street Journal) looking into whether Musk could have breached market regulations by making the announcement on Twitter, especially because his tweet included the words: “Funding secured.”

Tesla’s board released a statement on August 14, saying they have established a committee and retained a legal team to explore options for taking the company private.

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What are the options?

  • Saudi sovereign wealth funding? On August 13, Musk said his earlier announcement was made off the back of long-term discussions with Saudi Arabia’s sovereign wealth fund, which already holds a 5 percent stake in Tesla. Musk wrote that over the last two years “the Saudi Arabian sovereign wealth fund has approached me multiple times about taking Tesla private,” and that the “Managing Director of the fund … expressed his support for funding a going private transaction for Tesla at this time.”

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What are the implications?

  • Musk said business would be “smoother and less disruptive” as a private company.
  • In a letter to employees, he said it would end “end the incentive to attack the company” caused by traders shorting its stock. Musk says Tesla’s is the stock most heavily bet against (shorted) by share traders in history.
  • The move would mean members of the public could not invest in its stock, making the company more independent, and private owners less accountable.

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