Tesla shares halted as Elon Musk tweets he'll take the firm private

08 August, 2018, 08:28 | Author: Lora Ball
  • Elon Musk at a Tesla

What seemed like a joke at first may be serious and as the company's stock price went insane, trading had been halted. It is also the only auto maker building cars (some of them) under a tent, as Tesla strains to crank out cars for Model 3 buyers in the waiting line to buy and collect tax credits.

In a letter to Tesla workers that was posted on the company's blog, Musk called his idea the "best path forward". Musk has vowed that the company will start turning a regular profit in the second half of this year.

He shared more details in a series of Twitter replies, noting that should Tesla go private, he'd remain in his role as founder and CEO of Tesla.

We reached out to Tesla to find out what this all means and will update when we hear more.

As the matter unfolds, some are questioning whether or not the tweets are authentic. "Our guess is there is a 1 in 3 chance he can actually pull this off", wrote Gene Munster of Loup Ventures, adding that Mr. Musk's proposed premium over Tesla's existing share price might not be enough to persuade shareholders to sell.

Tesla didn't immediately respond to a request for comment. Taking Tesla's shares out of public markets would make it much more hard for people to engage in short selling of Tesla's stock.

A leveraged buyout of Tesla, which went public in 2010 on Nasdaq and which sports a market capitalization of almost $64 billion, or other take-private transaction would represent an abrupt change in financial strategy.

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On April Fool's Day, amid growing market concerns about Tesla's cash crunch, he had tweeted a fake news release that said Tesla would have to file for bankruptcy. The fact that the tweet gives a specific price, and that $420 is a long-standing marijuana in-joke, makes it even more possible that this is a hoax or Musk's idea of a joke.

Tesla stock was trading at about $355 a share before Musk's tweet.

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.

That came shortly before 3:30 p.m. when Tesla published an email that Musk sent to company employees, saying thatno final decision on taking the company private had been made and that it would ultimately be left to shareholders.

But Musk later on Tuesday seemed to confirm the plan, Tweeting that: "Investor support is confirmed". The company had a market value of $58 billion as of Monday's close. He also wrote that "once Tesla enters a phase of slower, more predictable growth, it will likely make sense to return to the public markets". He would still allow employees to keep their shares unless they want to jettison theirs at Musk's $420 price, which he noted was 20 percent higher than the stock was as of the Q2 earnings call.

Taking Tesla private would be an extreme albeit effective way of muting Tesla's bears, according to Michael O'Rourke, chief market strategist at JonesTrading.

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