This morning Elon Musk announced that he is planning on taking Tesla private.
While this may be a shock to many, Elon’s rationale is quite clear and compelling. He would like to see less distractions and less short-term thinking for Tesla and he thinks that removing Tesla from the public stock market will accomplish this.
To understand Elon’s rationale, one must understand the plethora of propaganda attack that Tesla has been under over the past year. It’s been evident to many that there’s been a coordinated and efficient plan for those wishing to see Tesla fail to tarnish Tesla’s image and to hurt their chances of success. (Read this post about short sellers by jesselivenomore on TMC, https://teslamotorsclub.com/tmc/threads/elon-musk-vs-short-sellers.118431/).
Over the past several months, I’ve been suggesting that Tesla has been losing the narrative around their company and story.
It turns out Elon has another plan to turn the narrative around. And his plan is if he takes Tesla private, then the negative propaganda around Tesla fed by short sellers will stop and this will ultimately benefit Tesla and their mission. Further, Tesla will be able to return to the public stock market at a future date, if needed.
I understand Elon’s plan and the reasoning behind it. In my opinion, Elon just wants to make amazing cars and change the world. He doesn’t have much interest in constantly defending Tesla in the media against a propaganda war. To Elon, all of that is just distraction. And Elon further isn’t seeing a lot of benefit of needing to deal with the fluctuating stock price, testy analysts, and quarterly expectations. Simply put, in Elon’s thinking if Tesla were to be free of all those pressures, they would be better in executing toward their mission.
And so, starting today we start the journey of Tesla possibly going private.
Going private is not a done deal since it needs to have shareholder vote for approval. However, with Elon holding 20% of the shares (thus 20% of the vote), he may only need another 31% or so, which would be fairly easy to obtain (in my opinion), unless he chooses to recuse himself from the vote.
According to Elon, in the event that Tesla goes private, all current shareholders would be transfer their shares to ownership in the new company. Elon tweeted, “My hope is all current investors remain with Tesla even if we’re private. Would create special purpose fund enabling anyone to stay with Tesla. Already do this with Fidelity’s SpaceX investment.”
It’s going to be interesting to see TSLA stock price over the next weeks. As the proposal to take Tesla private goes to shareholder vote, those who’ve sold the stock short (35 millions shares) will need to cover (or buy back the shares). We might yet see the “short burn of the century” that Elon alluded to several weeks ago.
All in all, Elon’s announcement today was one of the biggest he has ever announced and will have major ramifications for Tesla and TSLA investors going forward.