Elon Musk tweets that he may take Tesla private, shares jump 11 per cent

Tesla Inc.’s enigmatic chief executive Elon Musk shocked Wall Street on Tuesday, revealing in a tweet that he’s considering taking the company private, sending the embattled electric vehicle maker’s shares up 11 per cent, or US$1.1-billion.

Mr. Musk took to Twitter Tuesday to announce he had lined up investors to take the automaker private at US$420 a share, a price that would value the company at more than US$70-billion.

“Am considering taking Tesla private at $420,” Mr. Musk wrote. “Funding secured.” The news sent Tesla’s share price surging more than 7 per cent before trading was briefly halted.

The move comes as Mr. Musk has been under mounting pressure from investors and analysts to stem Tesla’s financial losses after repeatedly missing production targets for the Model 3, its mass-market sedan, even as it faces increased competition from major automakers, several of whom are planning electric vehicle offerings.

Tesla lost US$717-million in the second quarter, its largest quarterly loss. The California car maker has burned through US$1.8-billion in the first half of 2018 and is among the most-shorted stocks on the U.S. markets.

In a blog post on Tesla’s website, Mr. Musk said taking Tesla private, in what analysts expect could be the largest leveraged buyout in U.S. history, would allow the company to ignore the pressures of the stock market and focus on long-term plans.

“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,” he wrote. He added that “being public means that there are large numbers of people who have the incentive to attack the company.”

Mr. Musk has fought bitterly in recent months with analysts, journalists and short-sellers. Often his erratic behaviour has drawn more attention than his struggles to shift Tesla from a niche luxury car maker into a mainstream automotive company.

During a conference call in May, Mr. Musk shut down questions from analysts, calling them “boring” and spent much of the time talking to an investor who runs a YouTube channel, prompting an after-market sell-off of Tesla’s shares.

He has been accused of spreading himself too thinly to steer Tesla to profitability in the competitive auto industry. In addition to Tesla, he runs private space exploration firm SpaceX and tunnel-building and transit firm The Boring Company.

Earlier this year, he proposed building a website to rate reporters’ credibility and launched a Tesla Roadster into space aboard a SpaceX rocket. On Sunday, he Tweeted a link to a parody of a movie about Adolf Hitler aimed at short-sellers, writing, “Dang, turns out even Hitler was shorting Tesla stock.”

But more recently Mr. Musk seemed to be turning things around. He repeatedly apologized to analysts during a second-quarter earnings call last week. Investors have also applauded Mr. Musk’s efforts to rein in spending and boost Model 3 production to 5,000 vehicles a week, in part by running production lines inside a giant tent on the grounds of Tesla’s Freemont, Calif., factory.

Some observers initially derided Mr. Musk’s plan to take Tesla private at $420 a share as a marijuana joke - 420 is a euphemism for April 20, a popular annual cannabis celebration.

But the market appeared to take him seriously with Tesla shares surging on the news. “I can’t believe this is something to bluff or make fun of,” George Galliers of Evercore ISI said. “Given his historic frustration with short-sellers, analysts and certain parts of the press, it is perhaps also not surprising that he has given consideration to taking the company private.”

Mr. Musk could also face scrutiny by the U.S. Securities and Exchange Commission if his tweet turned out to be a joke. The SEC declined to comment on Tesla, but the regulator has previously declined to sanction Netflix CEO Reed Hastings in 2013 for revealing important company information on Facebook.

Mr. Musk did not detail where the money for a buyout would come from, tweeting that investor support was only “contingent on a shareholder vote.” The Financial Times reported Tuesday that Saudi Arabia’s sovereign wealth fund had recently amassed a US$2-bilion stake in Tesla.

However, some analysts were skeptical that Mr. Musk could engineer a buyout. ”Our guess is there is a 1 in 3 chance he can actually pull this off,” wrote Gene Munster of Loup Ventures, adding that Mr. Musk’s proposed premium over Tesla’s existing share price might not be enough to persuade shareholders to sell.

With files from Reuters