Musk reverses plan to take Tesla private citing investor concern
25 Aug 2018
1
A fortnight after Elon Musk announced plans to take his new-age electric car maker Tesla Inc private, the maverick entrepreneur made an about turn, announcing that Tesla isn't going private and would rather focus on Model 3 and profitability.
The process of going private would be "more time-consuming and distracting than initially anticipated," Musk said in a blog post, adding that Tesla must remain absolutely focused on its Model 3 production, and reaching profitability.
The Tesla chairman and CEO and the company’s largest shareholder said he had met with the board and “let them know that I believe the better path is for Tesla to remain public. The board indicated that they agree.”
After about two weeks of commotion over Musk's claim of taking Tesla private, the South African-born entrepreneur, on Friday night,
The announcement of going private at a time when Tesla was going through a low phase would have mauled the company’s market value and it is the fear of losing credibility that forced Musk to reverse his stand.
There was even speculation about how Musk would raise money to take Tesla private. But that is unlikely now and his actions would be under scrutiny.
Musk on 7 August tweeted that he wanted to take the electric-car maker private at $420 a share and had “funding secured”, which sent the shares soaring before it became apparent he didn’t have financing lined up.
This led to the US Securities and Exchange Commission subpoenaing Musk, according reports citing sources familiar with the matter.
Musk later gave a tearful interview with the New York Times on his lack of sleep and stress. Musk, who also runs the rocket-launching company SpaceX and a tunnel-drilling outfit called the Boring Co, is busy trying to ramp up Tesla’s production of the Model 3 sedan and make the company profitable in the second half of the year.
On 13 August, Musk again indicated in a blog post that he had a conversation with Saudi Arabia’s Public Investment Fund and that he expects financial support from the sovereign fund to go private.
On Friday, Musk reiterated his “belief that there is more than enough funding to take Tesla private” but said a transaction would be distracting and take too long.
“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,” wrote Musk. “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.’”
In a later tweet, he added: “In talking to our public investors, most were supportive of optimizing for long-term value creation over quarterly earnings. This was also a factor in remaining public.”
Musk declined to comment further Friday on how he arrived at his decision. He was active on Twitter late Friday, sharing updates about SpaceX and a Hyperloop pod competition.
In a separate statement, the Tesla board confirmed the decision and announced its intention to dissolve a committee of independent directors formed to review Musk’s proposal.
“We fully support Elon as he continues to lead the company moving forward,” the independent board members said.
.webp)
