San Francisco, Aug 8 (IANS) In a surprise move, Elon Musk has announced to take his electric car maker company Tesla private at $420 per share.
Tesla has been public since 2010.
“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,” Musk wrote to Tesla employees in an email on Tuesday.
According to him, being public also subjects Tesla to the quarterly earnings cycle that puts enormous pressure on it to “make decisions that may be right for a given quarter, but not necessarily right for the long-term”.
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.
The news led to Tesla share going up to $343.84 at the end of trading on Tuesday.
Musk, who owns approximately 20 per cent of Tesla at the moment, said he aims to structure the company in such a way 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 per cent premium over the stock price following our Q2 earnings call (which had already increased by 16 per cent).
Musk said he wants all Tesla employees to remain shareholders of the company just as is the case at SpaceX.
“The intention is not to merge SpaceX and Tesla. They would continue to have separate ownership and governance structures,” Musk wrote.
This proposal to go private would ultimately be finalised through a vote of shareholders.
“Investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote,” Musk tweeted.
Shares of Tesla were halted on Tuesday afternoon following Musk’s Twitter message — an announcement that blindsided Wall Street and led to questions about fraud, the New York Post reported.
The Tesla CEO tweet earlier sent shares up $16 in five minutes, to $371.07.
The stock since settled at $366.94 before exchanges halted trading, pending an upcoming announcement from the company.
It was unclear what prompted the tweet. Earlier in the day, it was reported that Saudi Arabia was taking a $2 billion stake in the electric automaker, the New York Post reported.
It was also unclear what brought him to the $420-a-share figure — the number can be used as a slang term for marijuana. Musk previously tweeted an April Fool’s joke about his $60 billion company going broke.
The surprise announcements prompted former Securities and Exchange Commission Chairman Harvey Pitt to question whether Musk had broken securities laws.
The tweet “might constitute fraud if any of the facts he disclosed are not true”, Pitt said on CNBC.
Tesla has not confirmed whether the tweet was real — or if the CEO’s account was hacked.
Bullish on the performance and increased production of “Model 3” cars, Musk is also planning to introduce a mini-car.
The electric car maker reported revenue of $4 billion in the second quarter of 2018, with $2.2 billion in cash in hand.
Tesla is producing roughly 7,000 Model 3, Model S and Model X vehicles per week.