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Tesla trading halted after Elon Musk's 'take-private' tweet sends stock soaring Tesla shares soar after Elon Musk floats plan to take company private
(about 1 hour later)
Shares in Tesla surged before trading was abruptly halted after Elon Musk responded to reports that Saudi Arabia has built up a stake in the electric carmaker by saying he could take the company private. Tesla’s share price surged on Tuesday after Elon Musk announced he was considering taking the electric carmaker private.
Tesla’s stock rose by more than 6% by the middle of Wall Street’s trading session on Tuesday after Musk tweeted that he was “considering taking Tesla private” and had funding in place to do so at a price of $420 (£325) per share. Tesla’s stock rose by more than 7% after Musk tweeted he was “considering taking Tesla private” and had funding in place to do so at a price of $420 (£325) per share. Shortly after, Tesla published a blogpost written by Musk entitled ‘Taking Tesla private’ that had been sent to all employees.
The tweet appeared to be triggered by a report in the Financial Times that Saudi Arabia, one of the world’s largest oil-producing nations, has built up a stake in Tesla worth up to $2.9bn. Musk’s tweet appeared to be triggered by a report in the Financial Times that Saudi Arabia, one of the world’s largest oil-producing nations, has built up a stake in Tesla worth up to $2.9bn.
Am considering taking Tesla private at $420. Funding secured.Am considering taking Tesla private at $420. Funding secured.
A price of $420 per share would value Tesla at more than $70bn, well above its stock-market value, which reached $60bn on Tuesday after the stock climbed. At $420 a share, Tesla would have an enterprise value of about $82 billion including debt, well above its stock-market value, which reached $63.8bn on Tuesday. Shares closed up 11% at $378.
Tesla’s tumultuous day began with a tweet from Musk, issued shortly after the Saudi Arabia reports emerged. “Am considering taking Tesla private at $420. Funding secured,” Musk tweeted. “I don’t have a controlling vote now and wouldn’t expect any shareholder to have one if we go private. I won’t be selling in either scenario.”
But in the letter sent out to Tesla employees, Musk did not say that Tesla had secured funding. He wrote instead that “a final decision has not yet been made, but the reason for doing this is all about creating the environment for Tesla to operate best”.
Musk described the “wild swings” in Tesla’s stock price as a “major distraction” and said the quarterly earnings cycle puts “enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term”.
But Musk rejected the interpretation that he was simply seeking greater wealth or control of the company than the 20% he already owns. He wrote: “Basically, I’m trying to accomplish an outcome where Tesla can operate at its best, free from as much distraction and short-term thinking as possible.”
Saudi Arabia’s public investment fund, which invests its vast oil wealth, has quietly built up a stake of between 3% and 5% in the company, according to the FT. The investment would not have emerged until now because stakes of less than 5% do not need to be disclosed to the stock market.Saudi Arabia’s public investment fund, which invests its vast oil wealth, has quietly built up a stake of between 3% and 5% in the company, according to the FT. The investment would not have emerged until now because stakes of less than 5% do not need to be disclosed to the stock market.
PIF, which manages more than $250bn in assets, reportedly made an overture to Musk earlier this year, offering to invest money in the company in return for new shares.PIF, which manages more than $250bn in assets, reportedly made an overture to Musk earlier this year, offering to invest money in the company in return for new shares.
Tesla ignored the approach, prompting PIF to begin acquiring shares in the company through the stock markets, with the assistance of JP Morgan.Tesla ignored the approach, prompting PIF to begin acquiring shares in the company through the stock markets, with the assistance of JP Morgan.
In a tweet issued shortly after the reports emerged, Musk wrote: “Am considering taking Tesla private at $420. Funding secured.” Analyst Gene Munster, a managing partner at venture capital firm Loup Ventures, told Bloomberg of Musk’s tweet: “Elon Musk does not want to run public companies His missions are big and make it difficult to accommodate investors’ quarterly expectations. Our guess is there is a one-in-three chance he can actually pull this off.”
He tweeted: “I don’t have a controlling vote now and wouldn’t expect any shareholder to have one if we go private. I won’t be selling in either scenario.”
The rise in Tesla’s share price took its value to $20bn more than the value of Ford.
Notwithstanding the difficulty of raising more than $50bn to buy out other shareholders in the money-losing automaker, Musk’s reasoning to bring Tesla back into private ownership is at least understandable.
“Elon Musk does not want to run public companies,” Gene Munster, a managing partner at venture capital firm Loup Ventures, told Bloomberg. “His missions are big and make it difficult to accommodate investors’ quarterly expectations. Our guess is there is a one-in-three chance he can actually pull this off.”
But a little more than an hour after Musk teased his privatization plan on Twitter, trading in Tesla shares was abruptly halted.
No Wall Street bank contacted by the cable channel CNBC said it was aware of any transaction or had any knowledge of commitment to funding a leveraged buyout of Tesla.No Wall Street bank contacted by the cable channel CNBC said it was aware of any transaction or had any knowledge of commitment to funding a leveraged buyout of Tesla.
The Securities and Exchange Commission (SEC) also declined to comment on the matter.The Securities and Exchange Commission (SEC) also declined to comment on the matter.
The confusion increased speculation that Musk was engaged in a stunt – which could backfire if Musk is found to have violated fiduciary directives governing how senior executives at publicly-held companies are permitted to release information that could affect a firm’s stock price.The confusion increased speculation that Musk was engaged in a stunt – which could backfire if Musk is found to have violated fiduciary directives governing how senior executives at publicly-held companies are permitted to release information that could affect a firm’s stock price.
In 2013, the SEC ruled that companies are allowed to use social media outlets like Facebook and Twitter to announce news. But Musk seemed to be making a pun by twice tweeting “420” – an abbreviation of 4/20, a code-term for the consumption of cannabis. In 2013, the SEC ruled that companies are allowed to use social media outlets like Facebook and Twitter to announce news. But many thought Musk could be making a pun by twice tweeting “420” – an abbreviation of 4/20, a code-term for the consumption of cannabis.
Musk’s fondness for making statements via Twitter has backfired in the past. He attracted furious criticism after baselessly calling a British diver who helped rescue the boys trapped in a flooded cave in Thailand a “pedo”. Tesla’s share price dropped and Musk was forced to apologise.Musk’s fondness for making statements via Twitter has backfired in the past. He attracted furious criticism after baselessly calling a British diver who helped rescue the boys trapped in a flooded cave in Thailand a “pedo”. Tesla’s share price dropped and Musk was forced to apologise.
Elon MuskElon Musk
TeslaTesla
Saudi ArabiaSaudi Arabia
US economyUS economy
Automotive industryAutomotive industry
Securities and Exchange CommissionSecurities and Exchange Commission
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