Issue of the week: taking Tesla private
The carmaker’s maverick boss has had enough of Wall Street. But is his plan to reclaim Tesla really viable?
Tesla’s founder, Elon Musk, “has resorted to Twitter in recent months to crow about successes, goad his critics and launch antagonistic jibes”, said Richard Waters in the FT. “On Tuesday he went one better”, by “dropping news” that he is considering the world’s biggest-ever corporate buyout. “Am considering taking Tesla private at $420 [per share]. Funding secured,” Musk tweeted to his 22.3 million followers. That would value the loss-making electric car manufacturer at $70bn – a 20% premium on its price last week. The nine-word tweet left investors bemused. Was this another April Fool’s joke? Perhaps Musk was just “taunting the Wall Street short-sellers who have become his arch-enemies”. By the end of the day – during which it was also revealed that the Saudi Arabian sovereign wealth fund had taken a $2bn stake in Tesla – most had convinced themselves he was serious. The stock closed 11% up at $379.57.
“The audacity of the plan dumbfounded traders and reporters – as did the casual way Musk announced it,” said The New York Times. Yet one can see why taking Tesla private “makes sense for him”. In the eight years since the firm went public, it has been “battered” by investors for missing production targets and failing to turn a profit. Going private would free Tesla from stock market swings and the pressure of “quarterly earnings cycles”, as well as removing the opportunity for shortsellers to attack it. Musk, a maverick who has become “a billionaire several times over by boldly making big bets on ideas that few others thought possible”, has always had a tricky relationship with Wall Street. But relations have worsened recently, said Antony Currie on Reuters Breakingviews. “The visionary founder has appeared irritated by his lost status as the irreproachable boy wonder of Silicon Valley.” Last month he hit a low point, baselessly accusing a British diver involved in the rescue of boys trapped in a Thai cave of being a “pedo”, and facing calls for his removal.
No doubt Musk would like “to turn his back on Wall Street”, said the FT. But it’s far from clear how he’ll accomplish it. He gave no further details on how he would fund a buyout or when it would happen – and many are sceptical. Meanwhile, the company faces a growing storm: Musk has arguably violated stock exchange rules by tweeting his intentions, exposing Tesla to lawsuits from disgruntled investors. He has made a bolt for freedom, said The New York Times. But the big question is what happens to Tesla if this doesn’t work out. One thing he can be sure of: “the circus won’t have pleased big investors”.