Tesla Chief Executive Elon Musk has announced his intention to turn the electric car-maker wholly private by offering a leveraged buyout at USD 420 per share from the existing shareholders. “Am considering taking Tesla private at $420. Funding secured,” Musk, who owns about 20 per cent of Tesla shares, tweeted.
Following Musk's tweet, Tesla shares jumped 11 per cent that helped its value reaching up to USD 343.84 at the end of trading on Tuesday.
Musk wants Tesla employees to hold their shares just like the employees of SpaceX. “The intention is not to merge SpaceX and Tesla. They would continue to have separate ownership and governance structures,” Musk assured the employees in the email on Tuesday.
Faced with still competition from emerging new electric car makers including European automakers Audi and Jaguar, Musk believes making Tesla private would be “the best path forward” for the debt-laden company. Avoiding close scrutiny by the public market is another reason behind the move.
“As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders,” Musk wrote to Tesla employees.
Musk, who did not seek to expand his ownership, hopes the decision would be best in the long-term interests of the company. According to him, making decisions that may be right for a given quarter, but not necessarily right for the long-term can do more harm for the company which goes under tight financial constraints.
However, a final decision on the deal worth USD 72 billion overall is still awaited. The proposal to convert the Silicon Valley company, which has been public since 2010, into a private company also needs the approval of shareholders.
If Musk succeeds in taking Tesla Inc private, it would be the largest deal of its kind, breaking the record of USD 45 billion deal for Texas power utility Energy Future Holdings.
Musk had said that Tesla was planning to introduce a mini car. “We're working on a new Tesla mini-car that can squeeze in an adult,” Musk tweeted on Sunday.
Tesla has expansion plans to build a plant in Shanghai, China, and another one in Europe. The details of the funding are still not known. Saudi Arabia's sovereign wealth fund and China's Tencent Holdings could be possible investors. The New York Post reported that Saudi Arabia was taking a USD 2 billion stake in Tesla.
“Investor support is confirmed. Only reason why this is not certain is that it's contingent on a shareholder vote,” Musk tweeted.