Tesla shares soar on Musk musings
Tesla shares climbed as much as 13% on Tuesday night after its mercurial co-founder Elon Musk said he was considering taking the electric carmaker private.
In a series of tweets Musk, who has repeatedly complained about Tesla’s treatment on the public market and clashed with analysts, said he had already secured funding for the plan.
The company later released a statement, in which it said a final decision had not yet been made on whether to go private.
However, it said being public meant it was “subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders”, and put it under pressure to make short-term decisions that may not be good for the company in the long-term, given the quarterly earnings cycle.
Nasdaq authorities had halted trading following Musk’s tweets, as Tesla shares rose sharply, and they continued their climb after trading was resumed later in the evening, ending up 11% at $379.57 and giving Tesla a value of $65bn (R872bn) – slightly below their all-time high.
Musk said he could take the company private at $420 s share, compared with Tuesday’s opening price of less than $344. Such a deal would value the company at around $80bn (R1.07-trillion), including debt.
Harvey Pitt, former chair of the Securities and Exchange Commission, said Musk’s tweets could land him in hot water legally.
“If his comments were issued for the purpose of moving the price of the stock, that could be manipulation, and it could also be securities fraud,” Pitt told CNBC.
“The use of a specific price for a potential going-private transaction is highly unprecedented, and therefore raises significant questions about what his intent was. So that would have to be investigated.”
Musk made his announcement soon after it was reported that Saudi Arabia’s sovereign wealth fund had taken a stake of up to 5% in Tesla, a holding worth as much as $2.9bn (R39bn). The shares had jumped about 5% in response.
In a letter sent to Tesla employees earlier on Tuesday, Musk said all shareholders would have a choice to either stay investors in a private Tesla or be bought out at the $420 a share price.
He said employees would be able to sell their shares periodically, if Tesla were to go private, but that his intention would be for all employees to remain shareholders.
Answering questions from his followers on Twitter, Musk said Tesla “would create a special purpose fund enabling anyone to stay with Tesla”, comparing his plans to Fidelity funds that privately hold shares in his rocket company Space X.
However, while the structure would be similar, he said the intention was not to merge SpaceX and Tesla.
He said he was “super appreciative” of Tesla shareholders and would “ensure their prosperity in any scenario”.
Musk, who owns a 20% stake, told followers he would not sell his own Tesla shares if the company was taken private and would not expect to gain control either.