Taking Tesla Inc (NASDAQ:TSLA) private will allow it to remain focused on its long-term mission and will eliminate one major distraction for all working at the company -- the wild swings in the price of its shares, the company’s CEO said Tuesday.
When Elon Musk tweeted “Am considering taking Tesla private at $420. Funding secured” on Tuesday he was not joking and he soon explained in a letter to Tesla employees why such a move makes sense for the company at present. He said that being forced to stick to the quarterly earnings cycle as a public company results in enormous pressure on Tesla to make decisions that may be right for a particular quarter, but not necessarily for the long-term.
“I fundamentally believe that we are at our best when everyone is focused on executing, when we can remain focused on our long-term mission, and when there are not perverse incentives for people to try to harm what we’re all trying to achieve,” Musk said, adding that he wants Tesla to be free from as much distraction and short-term thinking as possible.
The going-private proposal will be subject to a vote by Tesla shareholders. The offer of USD 420 (EUR 362) per share represents a premium of 20% over the stock price of the company following the earnings call for the second quarter of 2018. For the period, Tesla reported an expanded net loss attributable to common shareholders of nearly USD 1.43 billion, but said it expected to be “sustainably profitable and cash flow positive” in the second half. Revenues jumped by 35% to USD 7.41 billion after both electric vehicle (EV) sales and revenues from the energy storage and solar business increased.
Musk said Space Exploration Technologies Corp (SpaceX) shows how being privately held allows a company to be much more operationally efficient. He pointed out that while there is now plan for the merger of the two firms, he expects Tesla to have a structure similar to that of SpaceX, where shareholders and employee shareholders can sell or buy shares around every six months.
Tesla’s CEO stressed that he wants all Tesla employees to remain shareholders and that he does not expect his stake, currently at about 20%, to change substantially after a possible transaction.
"In the future, once Tesla enters a phase of slower, more predictable growth, it will likely make sense to return to the public markets," Musk said.