Tesla stock surges after Musk tweet
Tesla CEO Elon Musk announced yesterday that he is considering taking the electric car maker private, causing the company’s stock to spike and prompting Nasdaq regulators to take the unorthodox step of halting trading.
When trading re-opened, the company’s shares were up more than 10 percent, closing at $379.57.
In keeping with his unorthodox style, Musk made the out-of-the blue announcement in a terse tweet. He said he may take the company private at $420 a share and already has secured funding.
“Am considering taking Tesla private at $420. Funding secured,” Musk tweeted, following up with “good morning” and a smiley emoji.
His tweet came hours after the Financial Times reported that Saudi Arabia’s sovereign wealth fund had built a significant stake in Tesla Inc., but it was unclear if that was the funding Musk was referring to. The Financial Times, citing unnamed people with direct knowledge of the matter said Saudi Arabia’s Public Investment Fund had built a stake of between 3 and 5 percent of Telsa’s shares.
Tesla did not immediate respond to requests for comment.
It’s highly unusual for the head of a major company make a significant announcement in such casual manner. The tweet prompted questions about how serious Musk’s intentions were. His asking price of $420 would be 22 percent above Monday’s closing share price, and nearly 9 percent above the stock’s all-time closing high of $385. The figure even drew some jokes on Twitter about whether it was a pot reference, with 420 being a common slang term for marijuana.
By taking Tesla private, Musk believes that the company will be able to sharpen its long-term focus of revolutionizing an automobile industry dominated by fuel-combustion vehicles without having to cater to investors’ fixation on how the business is faring from one quarter to the next.
Making money has proven elusive for Tesla while it has been investing in electric car technology and ramping up production of its vehicle, including a sedan with a starting price of $35,000 to appeal to a broader audience.
The company has only posted a quarterly profit twice in its history and has never made money during an entire calendar year, something that Musk has been trying to change by cutting costs, including recent mass layoffs that trimmed Tesla’s workforce by 9 percent. Tesla lost another $717.5 million in its most recent quarter.