Tesla CEO Elon Musk did an about-face Friday night and told his followers that he and the car company’s investors believe it’s best if they abandon plans to remove the automaker from the stock exchange.
“Most of Tesla’s existing shareholders believe we are better off as a public company,” Musk wrote in a late-night blog post on the Tesla website. He also noted that taking the company private after years of being on Wall Street proved to be too much of a distraction.
The company was turned upside after Musk told his Twitter followers in an Aug. 7 post that he secured “funding” to take Tesla private at $420 per share, far more than the company’s worth. His tweet followed a report suggesting Saudi Arabia became a major Tesla shareholder earlier this year. The announcement roiled the company and prompted a full-blown federal investigation.
“Moving forward, we will continue to focus on what matters most: building products that people love and that make a difference to the shared future of life on Earth,” he wrote in Friday’s blog post. “We’ve shown that we can make great sustainable energy products, and we now need to show that we can be sustainably profitable.”
One of the major sticking points for shareholders, Musk explained in the post, was their inability to hold shares in the company were it to go private. (RELATED: What Happens To Tesla Devotees If Musk Takes The Company Private?)
“(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,” he added.
This is a decidedly different tone than the one Musk made during the original tweet announcing the plan.
Musk initially told his followers on Twitter that they’d be able to own and keep their stock if the company went private. But financial rules prevent everyone who currently holds public shares from seamlessly moving into the private side, because there are different tiers of shareholders.
Musk’s gamble was likely a strategic move, one designed to limit distractions while Tesla produces the highly touted Model 3.
Private company management is not subject to the usual public monitoring and scrutiny of those that go public — analysts, short sellers and regulatory agencies, for instance, provide people information about Tesla before they purchase shares. Tesla has become a kicking boy for short sellers who are critical of the company’s business model.
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