By on August 7, 2018

After igniting a blaze of speculation via Twitter and halting the trading of Tesla stock, CEO Elon Musk made public an internal email sent to employees. In it, he lays out his reasoning for taking the publicly traded automaker private.

While there’s no mention of the secured funding mentioned in his earlier tweets, the desired share price — $420 — remains. And Musk seems quite confident that shareholders will see things his way.

From Tesla’s blog:

Earlier today, I announced that I’m considering taking Tesla private at a price of $420/share. I wanted to let you know my rationale for this, and why I think this is the best path forward.

First, a final decision has not yet been made, but the reason for doing this is all about creating the environment for Tesla to operate best. 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.

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.

This is especially true for a company like Tesla that has a long-term, forward-looking mission. SpaceX is a perfect example: it is far more operationally efficient, and that is largely due to the fact that it is privately held. This is not to say that it will make sense for Tesla to be private over the long-term. In the future, once Tesla enters a phase of slower, more predictable growth, it will likely make sense to return to the public markets.

Here’s what I envision being private would mean for all shareholders, including all of our employees.

First, I would like to structure this so that all shareholders have a choice. Either they can stay investors in a private Tesla or they can be bought out at $420 per share, which is a 20% premium over the stock price following our Q2 earnings call (which had already increased by 16%). My hope is for all shareholders to remain, but if they prefer to be bought out, then this would enable that to happen at a nice premium.

Second, my intention is for all Tesla employees to remain shareholders of the company, just as is the case at SpaceX. If we were to go private, employees would still be able to periodically sell their shares and exercise their options. 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.

Third, the intention is not to merge SpaceX and Tesla. They would continue to have separate ownership and governance structures. However, the structure envisioned for Tesla is similar in many ways to the SpaceX structure: external shareholders and employee shareholders have an opportunity to sell or buy approximately every six months.

Finally, this has nothing to do with accumulating control for myself. I own about 20% of the company now, and I don’t envision that being substantially different after any deal is completed.

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.

This proposal to go private would ultimately be finalized 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.

Thanks,
Elon

Tesla’s stock rose sharply following Musk’s tweets. After trading resumed following an hour-and-a-half halt, shares closed up 11 percent.

Earlier in the week, Musk retweeted a fan-made video in which Adolph Hitler (as portrayed in the movie Downfall) is seen shorting Tesla stock. The video was a swipe against the company’s “haters,” and specifically short-sellers, whom the most ardent members of the Tesla fan base use as scapegoats whenever something goes wrong at their beloved automaker.

[Image: Tesla]

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28 Comments on “In Musk’s Own Words: The Case for a Private Tesla...”


  • avatar
    mmreeses

    Being private has many, many benefits. the problem is math.

    Who are going to lend Tesla $70 billion? Elon is tweeting like he solved that problem.

    I’d like to know too….maybe they’ll throw mean some $$$. I’d be happy with only $100 million.

  • avatar
    Sub-600

    Being private has worked out well for Cargill and Koch.

  • avatar
    RRocket

    Oh the irony! After Musk always talking smack about “big oil”, his company is about to be owned by…Big Oil!

    I can’t wait to see how the Tesla fan boys are going to try and put a positive spin on this!

  • avatar
    brn

    Got the stock price up, didn’t he? Maybe that’s all he wanted.

    • 0 avatar
      civicjohn

      As the parent of a child with autism, I’d prefer if you kept your armchair diagnosis to yourself.

      • 0 avatar
        civicjohn

        I appreciate your apology, it’s just very difficult for many parents who find out their child falls under the Autism spectrum, and the misinformation and pure lack of knowledge makes it even harder.

        My son was diagnosed at age 5, when he having serious basic communication skills, yet he could read a college textbook. $150k+ of therapy, mainstreaming in the wonderful school system of my community where support was provided = him headed back to college next week as a sophomore in the School of Architecture with a GPA of 3.1. Yet, I still need to remind him to shave, he still struggles with social interaction. So while I am extremely proud, I will be watching over him until I’m 6 feet under.

        All I ask from anyone is just to not toss random things out there. 1 in 68 children are currently getting the diagnosis and I feel empathy with each of those families.

    • 0 avatar
      Guitar man

      Heh a salesman with autism….

  • avatar
    Carroll Prescott

    The car company is overvalued – there is no way this company is worth $20 per share or more. This is a house of cards run by a visionary with no business skills.

    He understands now that he can’t run his trap or he risks losing it all.

    I say – go private – but never ask for a government loan again.

  • avatar
    EBFlex

    So Elon is lying yet again.

    Not too long ago he said that shorts were not a problem.

    Now he’s saying they are and he needs to take his tent company private.

    So what’s the lie Elon? That shorts aren’t a problem or you’re taking Tesla private?

    Either way, you are lying.

    • 0 avatar
      mcs

      Don’t forget the fund managers that lied to their clients when they said shorting Tesla was a good idea. I wonder how many people lost their life savings because of these guys? Yet no one is attacking them.

      People that bet on Musk to succeed have made a lot of money. Personally, while I didn’t short Tesla, I was skeptical. I thought the stock price was way too high and stayed away. I took a safer route of investing in battery tech.

      • 0 avatar
        indi500fan

        Anybody who has “life savings” should not be putting a significant percentage of it on something like a Tesla short or puts.
        That’s just a bad money management.

    • 0 avatar
      SCE to AUX

      “https://www.youtube.com/watch?time_continue=236&v=wxEClGh6Mus”

  • avatar
    Fred

    Yea if you don’t want a bunch Wall Street types telling you how to run your business then being private does that. Not to mention you don’t have to hostile take overs and hedge funds that don’t mind tearing a business apart just to make a few million bucks.

    Of course getting $70 billion is a pain as well.

  • avatar

    Where is Icahn when you need him. Hm, he is busy with killing Xerox. Or Xerox is already dead? Anyway, next chapter – Icahn pops up in Tesla board meeting with ultimatums.

    Elon is a genius – stock is up 11% today.

  • avatar

    Where is Kirk Kerkorian when we need him?

  • avatar
    ScarecrowRepair

    Downfall parodies seem to bring out the creative juices in people. I’ve seen very few boring ones.

  • avatar
    Tstag

    Personally speaking I think Elon is taking a massive gamble in going Private. He’s had the market to himself for years but as the worlds car makers enter the few that will end quickly. The 2 differentiators they have over the likes of Jaguar and others is the Wizzy tech, such as auto pilot and the supercharger network. But the likes of google and Apple will solve the tech issues is car makers don’t first and efforts are already underway to solve the charging issues. In other words Tesla’s lead is rapidly shrinking.

    If I were Elon Musk Id leverage Tesla’s share price to buy another company like Mazda that has Global reach, brilliant engineers and all the infrastructure he needs to shortcut Tesla’s short comings. Then and only the. Will the share price make sense.

    • 0 avatar
      indi500fan

      I suspect institutional hubris would prevent Tesla from taking the path you suggest. No way could something like the Toyota Production System be better than Elon, JB, and the boyz.

  • avatar
    cartunez

    It will be amazing if he can pull this off. Ford struggles to keep a 41B market cap and Elon has investors living up to provide him with 70B plus debt.

  • avatar
    DeadWeight

    A private Tesla necessarily assumes a company that is leveraged 80x-90x via a management-led leveraged buyout, and even that may be a conservatively low leverage ratio depending on the true and accurate Tesla financial sheet as can only be revealed by an accurate GAAP measure.

    Elon gets a share price bump with some tweets based on total insanity that few bother to actually apply fundamental math to determine even basic fundamentals thereof.

    “Bloomberg commentator Sebastian Boyd is not buying it for a very simple reason: math (although meth would make it more palatable):

    Some Tesla Math

    Incidentally, Tesla has a free-float of 127.5 million shares. At $420 a share, that would cost you $53.6 billion. The company already has net debt of of $8.8 billion and an adjusted net leverage ratio of 13 times. Were it to be bought in a management-led LBO, a back-of-the envelope calculation would give it a leverage ratio of over 90 times, worse on a trailing 12-month basis. You can’t run a company on math like that.”

    This is the world that we are living in.

    It’s literally all a House of Cards, Total Bullish*t, and Mass Delusion.

    It’s the very definition of insanity.

    Drink the Soma, bathe in the snake oil, and pretend that anything is possible, and even probable, in the direct face of contrary facts and math.

    I knew the world had gone batsh*t crazy in 2007, just prior to the “Troubles” that followed.

    The world is set up for “Troubles” that will make those of 2008-2012 look less dramatic, now.

  • avatar
    NL

    I think Musk hopes to take the company private by *not* paying off most of the shareholders. He says he hopes most of the stockholders will stay with the company. If he can convince most of them to do that, he will only have to pay off a fraction at $420/share. The financing he needs depends on how many of the existing shareholders are willing to own such an illiquid investment. His go-private plan could be structured such that it only takes effect if some (low) percentage of shareholders take the money and run.

  • avatar
    danio3834

    Either:

    1. They’ve exhausted all viable means of raising more funds.

    2. Musk is lying to pump the stock price because of 1.

  • avatar

    The idiots who run this site apparently have never reviewed a Tesla. All they car about is being assholes dissing everything they can about Musk

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