Tesla going private halts U.S stock market: Here’s what Elon Musk now plans

Elon Musk halts the U.S trade market by tweeting about Tesla going private. Here are the reasons why Elon Musk believes that going private will be a big boost to Tesla's long-term growth.

By: | Updated: August 8, 2018 11:04 AM
Elon Musk, Twitter to go private Image: Reuters

Tesla CEO Elon Musk is now considering taking Tesla private and has given a big shock to investors and analysts who are currently betting big on Tesla. Riding high on meeting the production demand of Tesla Model 3 electric car, Elon Musk first tweeted and then sent an e-mail to its employees explaining the reasons behind Tesla going private and the off the share market.

Elon Musk reasons state that as a public company, Tesla is subjected to wild swings in its stock price that causes a major distraction for the company’s employees, all of whom are also shareholders. Shareholders are yet to approve this idea and buy out deal suggested by Elon Musk which creates a huge disruption in Tesa’s financial strategy. Tesla went public on Nasdaq about 8 years back and currently has a market capitalization of about $64 billion.

Going private also means Tesla would no longer require to disclose its financial earnings every 3 months and no scrutiny from Wall Street. Musk also says that being public puts enormous pressure on the company’s quarterly earnings which might not be right for long-term.

After tweeting about Tesla going private, Musk also sent an email to all its shareholders explaining its rationale for wanting to go private.

In a blog post, made public after several hours of tweeting, Musk laid out his rationale for wanting to go private. Elon Musk’s tween said, “Am considering taking Tesla private at $420. Funding secured.” This tweet created a chaos at the Wall Street with Tesla’s stock shot up to about $367 from $342 before the trading was halted at 2:08 hrs.

Share market analysts were surprised and also raised questions about the seriousness of Elon Musk’s tweet and intent. In an ideal world, such a big decision would be first done in closed doors with the board and investors and then a filing would be sent to the Securities and Exchange Commission and then a press release. But Musk being Musk, he continues to amuse keeping his reputation of being unpredictable and his unconventional methods intact.

Citing the example of SpaceX, Musk says that for Tesla’s long-term future “ 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.”

Elon Musk would offer $420/share for those would like to exit Tesla with the company going private. He further said that “Shareholders could either to sell at 420 or hold shares & go private.” He also hopes that all current investors remain with Tesla despite the company going private. Tesla would create a special provision of funds for anyone willing to stay with Tesla. Musk has already done this with Fidelity’s SpaceX investment.

U.S trade market resumed trading at about 1 hr and 45 minutes with Tesla’s stock peaking at $387. Elon Musk is Tesla’s largest shareholder with about 20% of the stake being valued at about $12 billion as per various analyst reports.

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