In a tweet that has stunned investors, Elon Musk says he is considering taking Tesla private.
Privatising Tesla would ease pressure on the money-losing auto maker and would be the biggest deal of its kind.
“Am considering taking Tesla private at $420. Funding secured,” Tesla tweeted.
He later explained more in a blog post, making it clear that he feels constrained running Tesla as a public company. Taking it private would allow him to manage it more on his own terms.
“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,” Musk said in the post.
He said Tesla is subject to “wild swings” in its share price. The relentless criticism from short sellers are a big distraction for Tesla employees and being a public companies also requires Tesla to publicly report quarterly earnings. This, he said, puts “enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term.”
The unanswered question is how Musk, who owns almost 20 percent of the company, would be able to come up with the $66 billion required to complete the transaction. Tesla trades at $420 a share which means it would have an enterprise value of about $82 billion including debt.
The Wall Street Journal has reported that the US Securities and Exchange Commission has made inquiries about Musk’s going-private tweet. It wants to know whether the chief executive’s statement was factual and why the disclosure was made on Twitter rather than on a filing
Analysts say securing the funding for a negative cash flow business which has lost money every year since it went public and it’s been burning through billions of dollars to sort out its production issues would be unlikely.