Elon Musk, back on Twitter as he shared his plans to privatize Tesla….. this opened up a series of speculations that exploded shares of the company and Tesla suspended its stock market activities.
While everyone tried to find out if this was one of his typical statements or just another joke, Elon Musk made it clear that his intentions to turn Tesla into a private company were serious, and explained his reasons to his employees in an email.
One of the first reasons is that he wants to create a productive and economically efficient environment at Tesla, which is not possible in the context of a stock corporation:
As a listed company, we are subject to abrupt price changes that can be a major distraction for all who work at Tesla.
On the other hand, he claims that the dynamics to which a joint-stock company is subject do not allow it to work towards a long-term vision.
The public also subjects us to the quarterly earnings cycle, which puts Tesla under enormous pressure to make decisions that are appropriate for a particular quarter but not necessarily in the long run. […]
To illustrate this, Elon Musk uses SpaceX as an example and illustrates its operational potential, as it is a private company that does not have to deal with the factors mentioned above. After explaining his vision for Tesla as a private company, he made it clear that he did not see privatization as a long-term model:
“In the future, when Tesla enters a phase of slower and more predictable growth, it will probably make sense to return to the public markets.”
Another point he made in the statement is that SpaceX will not be affected if Tesla is ever privatized. Tesla and SpaceX would not merge, they would continue to work independently.
Finally, Elon Musk presented his plan for privatization with an initial proposal:
“Firstly, I would like to make it possible for all shareholders to vote. They can remain as investors in a private Tesla or be bought at a price of $420 per share, a premium of 20% on the share price after we received a profit call in the second quarter (which had already increased by 16%)”.
The last word is for the shareholders.
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