Economy

Musk says he may take Tesla private and shares roar

Musk says he may take Tesla private and shares roar

In a very characteristic move, Tesla CEO Elon Musk tweeted that he was considering taking Tesla private at a value of $420 a share.

Starting in November, Tesla faces repayment of $1.7 billion in debt over the next 18 months that is tied to the company's stock price. Before Musk's tweet, Tesla had a market value of $58 billion, already higher than that of General Motors or Ford, even though those companies are significantly larger and more profitable.

Trading of Tesla sharesresumed after the company published the statement and the stock closed at $379.57, up almost 11 percent for the day.

Musk detailed his reasoning for taking Tesla private in an email to employees that he later posted on the Tesla corporate blog.

Earlier in the day, the Financial Times reported that Saudi Arabia's sovereign wealth fund had built an undisclosed stake of between 3% and 5% in Tesla.

"Tesla's volatility makes it more of a trading stock than a value play", said Ihor Dusaniwsky, head of research at S3 in NY.

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In the letter, Musk lays out several reasons prior companies have left the public sphere: The quarterly earnings reports that may distract from a long-term picture, and scrutiny from short sellers.

While the decision isn't set in stone, Musk layout out a provisional plan to take the company private.

The company's stock price jumped from US$342.54 ($460.76) prior to the announcement to US$379.57 ($510.60) at the day's close, a rise of nearly 11 per cent, but still significantly short of the proposed buy back price.

Tesla has been public since it filed an IPO in 2010.

Elon Musk is the world's 31st-richest person and Tesla's largest shareholder.

Since Tesla is also the most shorted stock in history, Musk said the company's doubters have incentive to bash the company and depress the company's share price.

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Musk amplified this point on Tuesday, saying on Twitter that going private "will be way smoother", end "negative propaganda from shorts" and benefit shareholders.

"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", Musk said.

Mr Musk has had feuds with regulators, critics and reporters, and questions remain about Tesla's production and manufacturing difficulties, long-term demand for its cars and uncertainty over funding.

Tesla has been the subject of a number of short sales by investors - who feel the money-losing company doesn't have a path to profitability and that its shares will tumble.

George Galliers, analyst at Evercore ISI said he believed the tweet was serious.

"The short position is the best thing the stock has going for it. "Musk vs The Shorts" is a far better narrative than 'Tesla vs Mercedes/Audi/Porsche, '" Chanos said.

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