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Elon Musk Says Tesla Will Not Be Taken Private After All

By NexChange
Financial Services

After weeks of chaos that began with the tweet heard ’round the world, when Elon Musk expressed his desire to take Tesla private, Musk has now announced that the carmaker will remain a pubic company.

Musk said in a blog post that he informed Tesla’s board of directors on Aug. 23 that he believed “the better path is for Tesla to remain public.” He noted that the board agreed with this decision.

“I worked with 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,” Musk wrote in his blog post. “I also spent considerable time listening to current shareholders, large and small, to understand what they think would be in the best long-term interests of Tesla.”

Here are the conclusions that Musk reached:

  • 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. Additionally, a number of institutional shareholders have explained that they have internal compliance issues that limit how much they can invest in a private company. There is also no proven path for most retail investors to own shares if we were private. Although the majority of shareholders I spoke to said they would remain with Tesla if we went private, the sentiment, in a nutshell, was “please don’t do this.”
  • I knew the process of going private would be challenging, but it’s clear that it would be even more time-consuming and distracting than initially anticipated. This is a problem because 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.

The last point is interesting, because while Musk insists “there is more than enough funding to take Tesla private was reinforced during this process,” it’s not clear if this is actually the case. When he was trying to explain what he meant in his tweet about having the funding secured to take Tesla private, Musk said he had met with reps from the Saudi Arabian sovereign wealth fund, which “has more than enough capital needed to execute on such a transaction.”

However, the New York Times later cast doubt on this strategy, talking to sources who indicated “the fund had taken none of the steps that such an ambitious transaction would entail, like preparing a term sheet or hiring a financial adviser to work on the deal.”

So after all that drama, Musk will have to continue dealing with the “jerks” who are short-selling on Tesla’s stock.

Photo: Getty iStock

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