Tesla set to dump Wall St

TESLA Motors founder and CEO Elon Musk says his proposal to take his company private and delist it from the United States stock exchange now just hinges on a vote of shareholders after investor support was confirmed.

 

But Mr Musk indicated that the shift to private ownership might be temporary and that it could return to public ownership once it entered “a phase of slower, more predictable growth”.

 

Speculators jumped on Tesla shares on Tuesday, driving up the price by 11 per cent after, first, Britain’s Financial Times reported that Saudi Arabia’s Public Investment Fund had acquired just under five per cent of Tesla, and, second, Mr Musk tweeted that he was considering taking the company private at $US420 ($A565) a share – a healthy premium over the current price.

 

After opening at $343 a share on the New York stock exchange, the Tesla stock price hit $387 before falling back to $379. Trading was halted for a time during the afternoon, but resumed a short time later.

 

In one fell swoop, the share price rise increased Mr Musk’s personal wealth by almost $2 billion while punishing Tesla short-sellers – the bane of Mr Musk’s recent existence as he tries to lift Tesla to profitability while ironing out production hiccups with the new Model 3.

 

Mr Musk said funding had been secured for the buyout of shares for those wanting to sell their holdings under the new arrangement, but he added that no one would be forced to sell.

 

He said he hoped all shareholders would stay with the private company under a “special-purpose fund” ownership structure similar to that of his SpaceX rocket company.

 

However, Mr Musk did not say where he would obtain the funding for a buyout for those waiting to bail out of the electric vehicle company that is valued at more than $60 billion.

 

In an email to Tesla employees, Mr Musk said the final decision had not been made, but he indicated that he would proceed with the proposal which he said was “all about creating an environment for Tesla to operate at its best”.

 

He said Tesla was subject to wild swings in its stock price, creating a major distraction for everyone working at Tesla.

 

“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,” he said.

 

“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.

 

“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.”

 

Mr Musk held up SpaceX – his space rocket company – as an example of a largely privately owned organisation that was far more operationally efficient than Tesla in its current state, beholden to Wall Street.

 

Mr Musk said Tesla employees – all of whom are shareholders – would be invited to retain their Tesla stocks.

 

“If we were to go private, employees would still be able to periodically sell their shares and exercise their options,” he said. “This would enable you to still share in the growing value of the company that you have all worked so hard to build over time.”

 

Mr Musk dismissed the notion that he was angling for greater control of Tesla, saying he did envision his 20 per cent ownership changing under private ownership.

 

“Basically, 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,” he said.

 

“This proposal to go private would ultimately be finalised through a vote of our shareholders.

 

“If the process ends the way I expect it will, a private Tesla would ultimately be an enormous opportunity for all of us. Either way, the future is very bright and we’ll keep fighting to achieve our mission.”

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