Musk proposes buying back shares to help Tesla focus on the future, rather than short-term
Tesla's board have announced that they are considering chief executive Elon Musk's proposal to take the company private by buying back shares from holders at the rate of $420 each, a significantly increased price compared to the current market value. This isn't the only thing of note however, as the way that Musk announced this via Twitter is "very irregular", as described by former director of the New York office of the Securities and Exchange Commission Mr Calamari.
In a staff memo posted to the Tesla blog, Musk wrote the following:
First, a final decision has not yet been made, but the reason for doing this is all about creating the environment for Tesla to operate best. As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders. Being public also 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. Finally, as the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company.
From staff memo by Mr Musk
It's completely understandable that the chief executive of such a company would want to avoid pressure from shareholders for short-term profits, in order to focus on their long-term goals of bringing affordable electric cars to the masses. The company has been criticized for their lack of profit lately, despite just about meeting weekly production numbers, so this move comes as no surprise.
This has been seen as a very risky move by some analysts though, as if he doesn't have the money already lined up as he has indicated then he could be accused of price manipulation, as the share price for Tesla has increased since this announcement, putting heavy losses on anyone betting against the electric car company.
There is also the point that if 2000 shareholders opt to keep hold of their stakings in the company, then the company will still be subject to the disclosure rules of a public company, which is apparently what Musk is trying to avoid. I guess only time will tell, and if there are any other updates on this story I'll be posting a follow up.
Musk rose to prominence after founding and selling both Zip2 and X.com, then founding SpaceX and co-founding Tesla. It seems to many he is a visionary and man to look up to, with an almost cult like fever amongst his most devoted of fans but he also has his fair share of critics. His recent Hyperloop idea has been ridiculed by some in the engineering community for being nothing more than a pipe dream (puns, I've got them). There's no denying that ol' Musky has some grand visions, let's just hope his ego doesn't get the better of him. And to finish things off, here's my favourite Musk meme:
What do you think about this new announcement? Do you think Musk has what it takes to shake things up in the transportation racket? Let me know your thoughts and feelings down below in the comments section, and as always make sure to follow me for the latest Technology, Internet and Pop Culture updates. Until next time, take it easy!
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Sources:
Tesla board says there are buyout talks with Elon Musk on BBC News (https://www.bbc.co.uk/news/business-45118393)
Taking Tesla Private on Tesla Blog (https://www.tesla.com/en_GB/blog/taking-tesla-private)
Tesla Model S 85D from Flicker (https://www.flickr.com/photos/wbayercom/16752875226)
Elon Musk Zipline from 9Gag (https://9gag.com/gag/ax1Dybn/elon-musk-with-his-zipline)
Lol that zipline meme is halarious. I have to say another bold move by Elon and it just shows his values are more important than money to him. taking a company private again at that share price will cost him in the short term but give him more control over Tesla and allow him to realise his vision, this guy obviously has something big up his sleeve
It cracks me up every single time. There's another good one about Musk going home, but I couldn't find it.
Yeah, so long as he's definitely got the funding lined up to buy back the shares, I think it's a solid move. I definitely believe in the Tesla dream, in fact I'd give my right nut to have my own Model S!
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I'm hoping for big things. I know General Motors, etc. are all jumping into the whole self-driving and next generation vehicle ordeal.
I don't think it's a bad idea to look to invest in those technologies.
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