Why Elon Musk retreated when taking Tesla private

Shannon Bond and James Fontanella-Khan

Tesla remains a publicly traded company, chief executive Elon Musk has declared to leave a proposal that he made several weeks ago to delete the electric car company.

The decision, which Tesla announced on Friday evening and Mr Musk declined on Saturday, came almost three weeks after the eccentric co-founder surprised the world with a tweet double tweet and claimed that he was considering taking the company privately.

"I think it's better for Tesla to stay public," Musk wrote in a blog on the Tesla website last Friday. He said that the board had been informed the previous day and had expressed his agreement.

Musk said he made his decision after discussions with shareholders and advisers from Silver Lake, Goldman Sachs and Morgan Stanley about how his ambition can be achieved.

It is clear that the Tesla board is considering hiring a second order to help Mr Musk.

It is clear that the Tesla board is considering hiring a second order to help Mr Musk.


"Given the feedback I received, it is clear that most existing Tesla shareholders believe we are better off as a public company," he wrote. "Although the majority of the shareholders I spoke to said they would stay with Tesla if we were going private, the sentiment was, in a nutshell," please do not do this "."


He added: "I knew that the process of private going would be a challenge, but it is clear that it would be even more time-consuming and distracting than initially expected."

Acknowledged shareholder concern

When he responded on Saturday on Twitter to a small shareholder in Europe, who said he was forced to make money, Musk said that this was a factor in his thinking. Earlier this month, he had driven the creation of a special purpose vehicle with which investors could hold shares in a private Tesla.

"Could not let it happen, not even by expert fiduciary SPV, without creating an exotic trust structure that would probably not be accepted by regulators," he wrote. "The current rules have good intentions, but make it more difficult for small investors to create wealth."

Six of Tesla's board members confirmed in a statement that Musk had informed them of his decision and added that the chief executive had their full support.

"The board and the entire company remain focused on ensuring the operational success of Tesla … and we fully support Elon while continuing to lead the company."

No mention was made of adding a chief operating officer to assist him in the daily management of the company.

Tesla board thinks of a second in command

People who were close to the sign told it Financial times last week that the company considered hiring a second command to help Mr Musk and relieve some pressure from his back.

Musk's sudden proposal came through tweet on August 7, when he wrote: "Consider taking Tesla private for $ 420. Financing secured." It sent shockwaves through the company's investor base, where shares were picked up immediately after the tweet 10% before they were returned, because the uncertainty grew over the severity of Mr. Musk's claim.

The tweet came about an hour after the Financial Times reported that Saudi Arabia's public investment fund had built up a $ 2 billion stake in Tesla this year. M. Musk later explained that his statement on financing referred to conversations he had with the PIF on the private taking of Tesla.

But doubts about funding have brought the company, the board of directors and the chief executive under the supervision of the US Securities and Exchange Commission and have attracted possible class-action lawsuits from investors who bought shares after the tweet.

JPMorgan lowered the price target for Tesla's shares by more than a third to $ 195 this week, after raising it in the wake of Mr Musk's tweet about going private at $ 420.

Yet it is still possible, Musk suggests

Even with the withdrawal of his plan, Musk did not shy away from his belief that he could follow the plan to go private. "My conviction that there is more than enough financial means to take Tesla privately is reinforced during this process," he wrote.

The behavior of Mr. Musk in the past few weeks has prompted questions from investors and analysts. In an emotional interview with the New York Times he said that a & unbearable & # 39; years in Tesla had deeply considered his private life and health. He described 120-hour working weeks, days spent in his factory and reduced contact with his children and friends.

For several observers, the tweets of mr. Musk, who announced that he was planning to take the company privately, was looking for a personal vendetta against short sellers, who bet that the stock value of the company will fall as a result of Tesla's poor performance.

The decision to keep Tesla public will be welcomed by institutional investors who believe that the company's shares could rise much higher but could be forced to sell their positions if Mr. Musk went ahead with his private plan.

Catherine Wood, chief executive and chief investment officer of ARK Invest, a $ 5.9 billion active exchange traded fund manager and shareholder of Tesla, urged Mr Musk Thursday not to take Tesla privately.

"Taking Tesla private today at $ 420 a share would undermine it tremendously, giving many investors the opportunity to participate in the success," she wrote in an open letter to Mr. Musk.

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