Venture Update: Elon Musk Changes Mind On Private Tesla

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On Aug. 7, Elon Musk shocked the world when he announced through Twitter that he had plans to make Tesla a private company at $420 per share, which caused Tesla’s shares to increase by 10 percent on the same day. Since that tweet, Musk created a special committee of independent directors to assess Tesla’s move to become a private company, created a blog post on Tesla’s website detailing his reasons, and oversaw a Saudi Arabian wealth fund taken a $2 billion stake in Tesla.

However, on Aug. 24, Musk had retracted his aspirations when he announced that he was going to keep Tesla as a publicly-traded company due to the company’s shareholders and financial advisors’ reluctance to accept such a move. Musk replied that he "had the funds" to make Tesla a private company but kept it public due to shareholders' requests. "Given the feedback I've received, it's apparent that most of Tesla's existing shareholders believe we are better off as a public company," Musk stated. "Additionally, a number of institutional shareholders have explained that they have internal compliance issues that limit how much they can invest in a private company."

His change of opinion had occurred shortly after the Securities and Exchanges Commission had established an inquiry into Musk’s tweet on Aug. 7, and trying to determine if his statement in wanting to make Tesla public was truthful. If the statement is considered to be misleading, then Musk, and Tesla as a whole, would've been found guilty of fraud and market manipulation.

In a blog post Musk published out on Tesla’s website, he detailed that he had consulted with shareholders from some of the world’s most prominent financial firms such as Morgan Stanley and Goldman Sachs to discuss what are the best long-term interests for Tesla. In the same blog post, he mentioned that the day before, he had discussed Tesla’s future with the company’s Board of Directors and that all parties had agreed that Tesla should remain public and the company will remain improving on the Model 3 series.

According to Bloomberg, had the deal for Tesla to go private succeeded, Volkswagen would’ve been among one of Tesla’s investors to contribute as much as $30 billion into the company. However, once it was clear that Musk decided to change his mind, the investors’ plan also was called off as well.

Shortly after Musk’s announcement to retain Tesla as a publicly-traded company, Tesla’s stock quickly dropped as much as 4 percent in early trading and later closed Friday at $322.82 after suffering steeper losses. The losses, however, became steady as the stock closed down to 1.1 percent at $319.27 as the trading day progressed.

The initial deal to take Tesla private didn’t go as planned as the aforementioned Saudi Arabian wealth fund had shown no interest in buying out Tesla, according to Musk. In a separate response about some of Tesla's investors, Musk had stated that short-sellers have been "a thorn in his side" and would make money if Tesla's stock value declines and believed that taking Tesla private would put an end to the short-sellers' actions.

Musk’s announcement on Aug. 7 and his change of plan on Aug. 24th represent memorable events that occurred in a year in which he personally referred as, “the most difficult and painful year of my career." In a personal interview with Business Insider’s Bryan Logan, Musk listed some of the episodes of his career in 2018, with the Aug. 7 tweet being the most prominent event, as well as the inquiries coming from the SEC and numerous lawsuits from investors.

He had also revealed to the New York Times that the 120-hour per week schedule that he has had finally taken a toll on his physical health, especially when he had to miss his own birthday, missing time with his children. The only time that he was able to get out of the Tesla factory for a few good hours was when he was at his brother’s wedding.

Elon Musk built Tesla to become an automotive empire that has seen its growth as a top name in the electric vehicle industry, especially with the creation of the Model series and its very first vehicle, the Roadster. Musk's announcement to retain Tesla as a public company could mean more emphasis on the enhancement of the current Model 3, S, and X models and the continuing development of the new Tesla Semi and Tesla 2020 Roadster.