"Am considering taking Tesla private at $420," the CEO tweeted, adding that he has all the funding needed to make it all happen.
Musk elaborated on why he believes going private with Tesla is the best path forward in an email to Tesla employees:
"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."
Investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote. https://t.co/bIH4Td5fED— Elon Musk (@elonmusk) August 7, 2018
Musk's Tuesday announcement is ironic given his vow in April that "Tesla will be profitable & cash flow+ in Q3 and Q4, so obv [sic] no need to raise money." Now, he's indicating that he's established a plan with private equity investors to raise billions and take the company private.
— Elon Musk (@elonmusk) April 13, 2018
Tesla's current share price is around $360, so if shareholders were bought out during a private recapture of the company, each one would make $60 more per share than the spot market price. Musk said in a follow-up tweet, however, that he hoped all current investors would remain with Tesla if he made the switch and that a fund would be established with this end in mind.
Absolutely. Am super appreciative of Tesla shareholders. Will ensure their prosperity in any scenario.— Elon Musk (@elonmusk) August 7, 2018
The company's stock was up about $20 on the day as of writing time. Tesla's share price is considered especially sensitive to the words and behaviors of its CEO.
When a company is taken private, it has less pressure to meet analysts' quarterly earnings predictions, which may give companies incentive to conduct operational, accounting and financial engineering in order to meet Wall Street's expectations.
— Elon Musk (@elonmusk) August 7, 2018
Tesla lost $717 million in the second quarter of 2018, the company announced July 29. During the company's earnings call in late July, Musk was apologetic — in contrast to his treatment three months earlier of analysts who asked him financial questions the CEO dismissed as "boring" and "boneheaded."
"My apologies for not being polite on the prior call," Musk said during the Q2 earnings call last Wednesday. Shares instantly jumped following Musk's expression of contrition, despite the fact that Tesla had lost three-quarters of a billion dollars in just three months. The shares jumped 8.5 percent that day and grew the company's total value by $4.7 billion.
Advisory services bank KeyBanc Capital Markets called it "maybe the most valuable apology of all time."
Tesla's shares were previously affected when Musk called a diver involved in rescuing young members of a local soccer team trapped in the caves of Thailand a "pedo." He later retracted the tweet making the pedophilia allegation and made a "half-assed apology," according to Gizmodo.
The 88-year-old mother of the British diver delivered Musk a tongue-lashing, telling The Sun July 20, "If I had my way I'd put him against a wall and shoot him; it's disgusting coming from a millionaire as well. He probably thinks money doesn't hurt him and he can get away with anything."
Musk also made a controversial plea to environmental conservation group the Sierra Club to publicize his donation amounts and create some positive publicity. Musk sought to suppress the "firestorm" of criticism generated by news that he had donated $38,900 to a pro-Republican party PAC, Bloomberg reported.