Today eccentric billionaire, general genius, and Tesla’s head man Elon Musk threw a serious curveball at investors when he tweeted:
Am considering taking Tesla private at $420. Funding secured.
— Elon Musk (@elonmusk) August 7, 2018
In the hours following the tweet the stock price rocketed up almost 11%, an increase in company value of nearly $1.3 Billion.
There are plenty of good reasons for Musk to want to go private with his company, and he explained some of them in the email he sent to the employees at Tesla and posted on their website. See the letter here.
First off is the obvious increase in stock price, and therefore its value as a negotiating toll and to repay some of their monstrous pile of debt (currently nearly $11 billion) and then improve it’s overall credit rating. Second is to keep shareholders happy. I know it sounds backwards, but the current stockholders need to be able to focus on long term goals instead of short term quarterly goals. As Musk said
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.
Third but probably most important is the ability to keep the information and developments within the company private. Right now, as a publicly traded company, Tesla is forced to declare changes in employee compensation changes, staffing levels, production estimates and delivered numbers, and legal actions taken against the company. These would no longer be required and could provide a strategic advantage by allowing them to hold their figurative cards closer to their corporate chest.
Though actually getting the funding together seems like a challenge, with the company running cash-flow negative, and the huge debt load it already has, it’s not exactly highly marketable. That being said Musk says that the funding has been secured but we’ll have to wait and see what happens next!