On August 7, Tesla CEO Elon Musk sent the stock market into a tizzy when he tweeted out his plans to take his company private if the stocks hit $420. There was a suspension and also a resumption of the company’s shares, including reports of a major investment from Saudi Arabia. A significant investment from the same could loosen Musk’s grip on his company.
A tweet from Financial stated that Saudi Arabia’s sovereign wealth fund has bought a 3% to 5% stake in Tesla. This translates to an amount between $1.9 billion to $3.2 billion.
Am considering taking Tesla private at $420. Funding secured.— Elon Musk (@elonmusk) August 7, 2018
Saudi Arabia’s Public Investment Fund reportedly reached out to Musk, requesting to buy newly issued shares but Tesla declined the offer, resulting in the PIF buying shares in secondary markets. This would mean that the PIF is gaining control over the US company, a feat that Musk certainly wouldn’t like. Following FT’s report, Musk tweeted that he’ll make Tesla private if shares reach $420.
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.— Elon Musk (@elonmusk) August 7, 2018
Shareholders could either to sell at 420 or hold shares & go private— Elon Musk (@elonmusk) August 7, 2018
Investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote. https://t.co/bIH4Td5fED— Elon Musk (@elonmusk) August 7, 2018
Going by Musk’s tweet, if Tesla reaches a share price of $420, it would have an enterprise value of $82 billion including the debts, according to the Guardian. The report adds that in order to make his company turn private, Musk will have to make the biggest leveraged buyout in history. In a follow-up tweet, Musk confirmed that he doesn’t have a controlling vote currently and he doesn’t expect any shareholder to have one if Tesla becomes private. In either case, he ‘won’t be selling.’
Musk had sent an email to his employees on why he plans on taking Tesla private. The mail was posted on Tesla’s blog and it clarified that being public “subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term.” It also added that it means “that there are large numbers of people who have the incentive to attack the company.” Musk, however, added that “a final decision has not yet been made."