Elon Musk Says That Tesla Will Remain a Public Company
【Summary】After consulting with major financial firms, Tesla's CEO has backtracked on his bid to take Tesla private. Elon Musk said that Tesla will remain a public company.
Elon Musk's surprising August 7 tweet about taking Tesla private created waves on Wall Street and tanked the company's stock by nearly 20 percent. The tweet appeared to be impulsive, except Musk wrote that funding was already secured. However, after consulting with major financial firms, the Tesla CEO has backtracked on his bid to take Tesla private. Musk said that Tesla will remain a public company.
In a blog post published Friday night, Musk wrote that part of the process involved meeting with Tesla's current investors, in order to understand whether they believed that going private will help the company. More importantly, Musk needed assurance that the company's backers would even want to participate in a private Tesla. It appears as though they wouldn't.
"Given the feedback I've received, it's apparent that most of Tesla's existing shareholders believe we are better off as a public company."
"Our investors are extremely important to me. Almost all have stuck with us from the time we went public in 2010 when we had no cars in production and only a vision of what we wanted to be. They believe strongly in our mission to advance sustainable energy and care deeply about our success." Musk wrote.
Musk said he worked with investment firms Silver Lake, Goldman Sachs and Morgan Stanley, who have world-class expertise in these matters, to consider the many factors that would come into play in taking Tesla private, and to process all the incoming interest that we received from investors to fund a go-private transaction.
Morgan Stanley announced last week that it was ending its research it equity coverage of Tesla to avoid a conflict of interest. Musk sought advice from the investment firm about ways convert Tesla to a privately held company.
Musk said he spent considerable time listening to current shareholders, both large and small, to understand what they think would be in the best long-term interests of Tesla and a few things became clear.
One reason is that a number of institutional shareholders have explained that they have internal compliance issues that limit how much they can invest in a private company. Secondly, there is also no proven path for most retail investors to own shares if Tesla went private.
Musk wrote that a majority of shareholders he spoke to said they would remain with the electric automaker if it went private. However, Musk concluded that the overall sentiment from shareholders was to "please don't do this."
Musk admitted that taking Tesla public was challenging, likely much more difficult than he anticipated. The bid to go private would be too much of a distraction, especially while trying to ramp up production of the Model 3 over the past year. Musk wrote that "we absolutely must stay focused on ramping Model 3 and becoming profitable."
"We will not achieve our mission of advancing sustainable energy unless we are also financially sustainable. That said, my belief that there is more than enough funding to take Tesla private was reinforced during this process."
Musk met with Tesla's Board of Directors on Friday and let them know that now believed that the better path is for Tesla to remain public, which the board indicated it agreed with.
Musk wrote, "Moving forward, we will continue to focus on what matters most: building products that people love and that make a difference to the shared future of life on Earth. We've shown that we can make great sustainable energy products, and we now need to show that we can be sustainably profitable. With all the progress we've made on Model 3, we're positioned to do this, and that's what the team and I are going to be putting all of our efforts toward."
Some industry insiders have speculated that Musk was becoming unhinged after his announcement about taking Tesla private and his odd behavior, including criticizing the Thailand cave rescuers in July and his Twitter war with journalists writing about the company. There was even talk about hiring a new CEO to take some the pressure off Musk.
Now that the company will remain public, it appears that things will stay the way they are for now with Musk continuing to lead the company.
"I'm incredibly excited to continue leading Tesla as a public company. It is a privilege." Musk wrote on Friday.
Originally hailing from New Jersey, Eric is a automotive & technology reporter covering the high-tech industry here in Silicon Valley. He has over 15 years of automotive experience and a bachelors degree in computer science. These skills, combined with technical writing and news reporting, allows him to fully understand and identify new and innovative technologies in the auto industry and beyond. He has worked at Uber on self-driving cars and as a technical writer, helping people to understand and work with technology.
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