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Old 8th August 2018, 07:34   #1
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Default Tesla likely to go Private

Tesla wants to go private, wants to de-list and focus on long-term goals and rid itself of distractions , says structure cost to be similar to SpaceX.

Elon Musk announcement sent the market on a frenzy that led to trading on the company’s stock to be halted. Trading resumed later.

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Musk argued delisting would remove the "wild swings in our stock price that can be a major distraction for everyone working at Tesla", and the "quarterly earnings cycle [of a public company] that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term

Elon Musk :

Quote:
Earlier today, I announced that I’m considering taking Tesla private at a price of $420/share. I wanted to let you know my rationale for this, and why I think this is the best path forward.

First, a final decision has not yet been made, but the reason for doing this is all about creating the environment for Tesla to operate best. 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, all of whom are shareholders. Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term. Finally, as the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company.

I fundamentally believe that we are at our best when everyone is focused on executing, when we can remain focused on our long-term mission, and when there are not perverse incentives for people to try to harm what we’re all trying to achieve.

This is especially true for a company like Tesla that has a long-term, forward-looking mission. SpaceX is a perfect example: it is far more operationally efficient, and that is largely due to the fact that it is privately held. This is not to say that it will make sense for Tesla to be private over the long-term. In the future, once Tesla enters a phase of slower, more predictable growth, it will likely make sense to return to the public markets.

Here’s what I envision being private would mean for all shareholders, including all of our employees.

First, I would like to structure this so that all shareholders have a choice. Either they can stay investors in a private Tesla or they can be bought out at $420 per share, which is a 20% premium over the stock price following our Q2 earnings call (which had already increased by 16%). My hope is for all shareholders to remain, but if they prefer to be bought out, then this would enable that to happen at a nice premium.

Second, my intention is for all Tesla employees to remain shareholders of the company, just as is the case at SpaceX. If we were to go private, employees would still be able to periodically sell their shares and exercise their options. This would enable you to still share in the growing value of the company that you have all worked so hard to build over time.

Third, the intention is not to merge SpaceX and Tesla. They would continue to have separate ownership and governance structures. However, the structure envisioned for Tesla is similar in many ways to the SpaceX structure: external shareholders and employee shareholders have an opportunity to sell or buy approximately every six months.

Finally, this has nothing to do with accumulating control for myself. I own about 20% of the company now, and I don’t envision that being substantially different after any deal is completed.

Basically, I’m trying to accomplish an outcome where Tesla can operate at its best, free from as much distraction and short-term thinking as possible, and where there is as little change for all of our investors, including all of our employees, as possible.

This proposal to go private would ultimately be finalized through a vote of our shareholders. If the process ends the way I expect it will, a private Tesla would ultimately be an enormous opportunity for all of us. Either way, the future is very bright and we’ll keep fighting to achieve our mission.

Thanks, Elon
Musk also added that the only reason why this hasn’t happened yet is that they need to do a shareholder vote, which sounds like is going to happen.

Source:

Last edited by volkman10 : 8th August 2018 at 07:36.
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Old 8th August 2018, 19:53   #2
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Default Re: Tesla likely to go Private

Well this is interesting. If he takes it private how will tesla manage to raise the capital it needs to run ? Last time I checked it’s still burning money like a dumpster fire. Didn’t tesla make a loss of 700 billion already this year. ?If he takes it private he won’t be able to raise much money through sale of equity as compared to a public company. That means the other route is adding debt. That would be playing with fire.

Last edited by theMAG : 12th August 2018 at 01:49. Reason: Grammatics fixed
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Old 8th August 2018, 20:16   #3
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Default Re: Tesla likely to go Private

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Originally Posted by nakul0888 View Post
Well this is interesting. If he takes it private how will tesla manage to raise the capital it needs to run ? Last time I checked itís still burning money like a dumpster fire. Didnít tesla made a loss of 700 billion already this year. ?If he takes it private he wonít be able to raise much money through sale of equity as compared to a public company. That means the other route is adding debt. That would be playing with fire.
I'm sure you meant 700 million .
If Musk can cool it with the loud twitter personality, things wouldn't be this way.
He needs a social media manager first.
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Old 8th August 2018, 21:43   #4
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Default Re: Tesla likely to go Private

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Originally Posted by Doge View Post
If Musk can cool it with the loud twitter personality, things wouldn't be this way.
I agree that he needs to stay away from twitter banter for few months. But the amount of hatred and negative stories coming against Tesla even from reputed media houses is pathetic. Here are some of the things that I observed as I have been following the Tesla journey for the last few years. Most of these things are happening from the last 1 year at an unfathomable rate:
  • Tesla is the most shorted stock ever in the history. There is almost 1/3rd of floating share is shorted. More than $12 billion shares are shorted. Apple is the next closest at ~$10 billion but its 20 times bigger than Tesla.
  • Not a single day goes by without some negative propaganda against Tesla in CNBC, Bloomberg and even some times Reuters.
  • Dan Neil (Pulitzer prize winner) wrote a very positive review of Tesla Model 3 performance model last month. Fund managers like Mark Speigel and many others who shorted Tesla criticized Dan for his glowing review. Dan deleted his twitter account after that.

Last edited by theMAG : 12th August 2018 at 01:48. Reason: Grammatics fixed
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Old 8th August 2018, 22:03   #5
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Default Re: Tesla likely to go Private

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Originally Posted by nakul0888 View Post
If he takes it private he wonít be able to raise much money through sale of equity as compared to a public company. That means the other route is adding debt. That would be playing with fire.
As long as investors see long term potential, it will not affect Tesla's fund raising capacity in the form of equity. Taking a company private doesn't mean it will never list on stock markets again.
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Old 9th August 2018, 07:19   #6
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Default Re: Tesla likely to go Private

Elon Musk's twitter has SEC (Securities and Exchange Commission ) going after him

Tesla Stock Sinks In First Trading Day After Musk Reveals Go-Private Plan!


SEC, which regulates public markets, is interested to know why Musk made the important announcement on Twitter and if it is compliant with investor protection rules.

Quote:
The SEC has reportedly been interested in Muskís use of Twitter as the CEO of a major public company in other occasions in the past.

He has often made announcements about Tesla that moved the market, but arguably none as relevant to the public market than an announcement that he is considering to take the company off the public market and structure it as a private company
Quote:
Some investor-protection law firms have also announced that they are probing Muskís actions and they are seeking collaboration from people shorting Teslaís stock who took a loss from the rise in Teslaís stock price that followed Muskís tweets.
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Old 9th August 2018, 09:01   #7
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Default Re: Tesla likely to go Private

Meanwhile, here's a development:

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Saudi Arabia's sovereign wealth fund has acquired a significant position in Tesla shares, according to the Financial Times.

The media outlet says the Saudi's Public Investment Fund bought a 3 percent to 5 percent stake in the electric car maker, according to people with direct knowledge of the matter.

The stake is worth $1.9 billion to $3.2 billion at the company's current share price.
https://www.cnbc.com/2018/08/07/tesl...nd-has-2-.html

This is reminiscent of Michael Dell taking Dell private.

Also, an interesting article about it:

Quote:
over time, Dell came to the realization that servicing all of its debt, making strategic acquisitions and boosting shareholder returns was more challenging for a company that couldnít easily tap the public markets.
https://www.bloomberg.com/news/artic...n-t-a-cure-all
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Old 10th August 2018, 19:44   #8
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Default Re: Tesla likely to go Private

Tesla’s board of directors gets serious about putting in motion Elon Musk’s plan as markets doesn't believe it.

Quote:
The stock was trading about $70 below that exit option and therefore, it rose toward the price target, but it has now fallen from pressure as some analysts doubt the plan could work and Tesla shorts question Musk’s funding.
The board is going to decide on a formal review of Musk’s proposal in the next few days and the CEO might have to recuse himself from the board:

Quote:
The board expects to make a decision on whether to launch a formal review of Musk’s proposal in the coming days, and is speaking to investment bankers about hiring financial advisers to assist it in its review in such scenario.

If the board launches a formal review of Musk’s bid, he would have to recuse himself, or a special board committee would have to be formed, according to the sources, who requested anonymity because the deliberations are confidential
The plan has also received support from major shareholders, including Ron Baron, who owns half of billion worth of Tesla’s stock.


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Old 11th August 2018, 19:57   #9
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Default Re: Tesla likely to go Private

Elon Musk's logic in going private is understandable. He is one of the greatest tech visionaries of our time. He doesn't really need 1000s of analysts/investors second guessing him, questioning his decisions, telling him what to do, etc.

As smartcat mentioned, funds won't be a problem because Elon Musk is a proven entity. There will be PE companies standing in line to throw money at him, and he can accept their funds with the condition that they don't tell him what to do with their money.
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Old 13th August 2018, 14:55   #10
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Default Re: Tesla likely to go Private

Quote:
Tesla wants to go private, wants to de-list and focus on long-term goals and rid itself of distractions
Words of wisdom.

However, is there a possibility that all this was to "leak" to market a potential buyback price and raise the share price to that level?

Knowing Elon Musk looks really far fetched.



As others have explained, funding is not governed by whether the stock is listed in the open market or not. Any private equity firm can buy a fraction of ownership from the initial lot.

Last edited by alpha1 : 13th August 2018 at 14:57.
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Old 13th August 2018, 15:12   #11
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Default Re: Tesla likely to go Private

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Originally Posted by alpha1 View Post
However, is there a possibility that all this was to "leak" to market a potential buyback price and raise the share price to that level?
But why? If you want to do share buyback, you don't want the share price to raise too much. You want it to raise just enough that the majority will agree to sell it back. But not more.
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Old 13th August 2018, 15:52   #12
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Default Re: Tesla likely to go Private

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Originally Posted by Samurai View Post
Elon Musk's logic in going private is understandable. He is one of the greatest tech visionaries of our time. He doesn't really need 1000s of analysts/investors second guessing him, questioning his decisions, telling him what to do, etc.

As smartcat mentioned, funds won't be a problem because Elon Musk is a proven entity. There will be PE companies standing in line to throw money at him, and he can accept their funds with the condition that they don't tell him what to do with their money.
i never got the impression that Musk is to much bothered what all these analysts and (some small time) investors are saying anyway. Why would you want to talk to someone who is going all out short on your stock?

But I donít think you will find any investor that will invest without being told what is going to happen. PE have different investment strategies, but if anything they tend to be very hands on and in many cases do have formal influence through boards or simply through their amount of share.

So going private means Musk get rid of a lot of people that he never listened to in the first place. But he might end up with a few people who will be very demanding in a very different way and he will need to listen and provide adequate answers.

Musk does have a lot of experience dealing with PE of course. To him, it must be choosing between two evils, but at least the PE tend to have much bigger appetite for risk and work on different time lines.

Jeroen
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Old 13th August 2018, 16:02   #13
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Default Re: Tesla likely to go Private

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Originally Posted by Jeroen View Post
But I donít think you will find any investor that will invest without being told what is going to happen.
And Elon Musk is not an ordinary entrepreneur either. What I was trying to say was Elon Musk can act more like a elite Hedge Fund manager than an entrepreneur, when it comes to raising funds.
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Old 13th August 2018, 21:11   #14
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Default Re: Tesla likely to go Private

Elon Musk explains Saudi interest sparked effort to take Tesla private!

Musk elaborated on his thought process behind considering for the proposal in a lengthy post.

Quote:
The Saudi Kingdomís Public Investment Fund had approached Musk going back almost two years about taking Tesla off the market, confirming that the fund recently bought an almost 5 percent stake. Musk described a July 31 meeting in which the Saudi fundís managing director expressed regret that Tesla hadnít moved forward with a go-private transaction.

ďI left the July 31st meeting with no question that a deal with the Saudi sovereign fund could be closed, and that it was just a matter of getting the process moving
Quote:
He said this is why he tweeted on Aug. 7 that he had ďfunding securedĒ to take Tesla private at $420 a share

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Old 14th August 2018, 14:49   #15
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Default Re: Tesla likely to go Private

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Originally Posted by Samurai View Post
But why? If you want to do share buyback, you don't want the share price to raise too much. You want it to raise just enough that the majority will agree to sell it back. But not more.
What I mean is that the announcement may be only to increase the stock price.
There may not be any genuine intent of buying back the shares.
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