Why Elon Musk wants to take Tesla private?

Like other genius leaders, Elon Musk is also a very strong-minded person, and Zip2 and X.com (later PayPal), which he created in his early days, can see some clues. Subsequently, Ashlee Vance also revealed in Musk’s biography that Tesla’s listing in 2010 was not the wish of Elon.

“For Musk, listing means selling your soul to the devil.” Vance wrote in Musk’s biography. The reality is true, although the IPO can bring in real money, the price is not small. As a publicly traded company, Tesla will be looked at by countless eyes, and shareholders, short sellers, regulators, and journalists will wait for the news to come out all the time; and every quarter Tesla has to “dissect” itself to the public. In the opinion of Musk, this will bring great risks to their future vision.

In 2013, Musk sent an email to SpaceX employees with the theme of “listing”. When Musk’s biography was reprinted, Vance also added this email specifically. In the email, Musk said he didn’t want SpaceX to go public before the Mars transportation system was formed.

“Some of the SpaceX employees have no experience working in a public company, and may feel that listing is a desirable thing,” Musk wrote in an email. “But this is not the case. If you are a public company with new technology attributes; Companies often experience large fluctuations in stock prices, and the stock price fluctuations may be caused by internal execution problems or external economic conditions.”

Musk can say this because he has already tasted bitterness at Tesla and SolarCity (Musk was then Chairman of SolarCity, Tesla officially acquired the company in 2016). Musk also reluctantly said that the two companies listed, “they have no choice,” after all, the two companies need funds at the time. Musk also admitted that there are too many “pits” on the market. For example, “listed companies may become targets of some unscrupulous lawyers; they will buy someone to buy a few stocks and then pretend to represent all investments. This may even be the reason for the decline in the company’s stock price. Sometimes, a small setback may lead to a storm.

Listing is not a wrong choice for Tesla

However, staying in the market is not so good? Not always.

No matter from which point of view, the listing of the year is the right choice for Tesla. First, in the past ten years, the market value of this electric vehicle manufacturer has grown by more than 1100%, with an annual growth rate of 36.7%. The market value is equivalent to 128 times the company’s annual revenue, while the established manufacturers Ford and GM are only 7 times and 6 times. What else can Tesla complain about?

Secondly, although Tesla has always been sung, it has also brought lasting heat to the company. Once privatized, I am afraid that everyone’s attention will be quickly reduced.

Third, Tesla talked about taking Dell as a privatization, but the two companies are completely different. Dell’s business has long been a sunset, and Tesla is still on the rise, staying in the market for more sustained growth.

Finally, given Tesla’s current financial situation, it is safer to stay in the market because this is the best source of financing.

Why does Musk hate the company’s listing so much?

Musk announced on Twitter that he was considering letting Tesla withdraw from the market with a stock price of $420. Bloomberg even called it the largest leveraged buyout ever, and Musk might have to sign a value of $72 billion. Super check of the dollar. Later, he attached an email to Tesla employees explaining that the delisting would free Tesla from the “great pressure” of quarterly earnings.

Musk also pointed out that “Tesla is the worst stock in the history of stocks, which also created the motive for everyone to attack Tesla. I have been trying to make Tesla all along. Run at the best, try to stay away from distracting things and short-sighted thinking. At the same time, try to minimize the changes of investors (including all of our employees). In addition, he also clarified that it is special Sla will not merge with SpaceX.

The listing also includes another meaning, that is, the unreserved disclosure of financial information, and “Musk likes stealth.” In an interview with Bloomberg News in January 2015, Musk said: “There is too much noise around listed companies, and people will comment on your stock price and valuation from time to time. For any company, listing will increase management. On the overhead.”

This financial struggle actually began with an abstract concept, Tesla’s stock. For the listing, Musk said that the stock price fluctuated with the economic situation, but he did not mention the ability of Tesla to build and sell cars. Of course, the sentiments and opinions of investors are also crucial to Tesla’s share price.

For external public opinion, Musk is an extreme symbol: fans who like him respect him as a god, but people who hate him think that Musk is a tyrant. Therefore, the battle between Musk fans and critics is actually similar to the fight between bearish and bullish Tesla stocks.

Musk is definitely a Twitter master, and he often posts tweets to those who are short-sighted. Last weekend, he issued a message saying, “Even Hitler is looking for Tesla shares.” However, IHS Markit’s data shows that these bearers actually hold Tesla’s 33.8 million shares. As a result of Tesla’s idea, these bears lost $783 million directly (Tesla’s share price rose). Of course, privatization is not the whole reason for the rise in Tesla’s share price. Tesla’s share price has been rising due to the $2 billion investment from the Saudi sovereign fund (Musk still holds a 20% stake in Tesla).

However, Musk’s extremely bold tweets have caught the attention of the regulatory authorities. “If Musk just said it, Tesla no longer has the next move, or they don’t get the money needed to delist the market, I am afraid the regulator will find Musk to settle the account. After all, he is a tweet. Let Tesla’s share price soar by 11%. “Don’t forget, Tesla is still a listed company.

Is Tesla’s privatized reality?

In the tweets and emails, Musk did not disclose where he got so much money, and many banks also issued statements stating that they had no contact with Musk. In April last year, Softbank had contact with Tesla to discuss the company’s privatization, but that didn’t work out.  Suppose Musk really pulls in huge sums and the media don’t get reliable news. So what about? Musk can only have 20% of the shares in his hands, and the delisting transaction is not carried out by him.

The Wall Street Journal believes that even if Tesla moves toward privatization, its board of directors will set up an independent committee to assess whether the transaction is in the company’s interest, which means that privatization will lead to more competitive offers. In addition, Musk hopes that existing shareholders will remain on the board of directors and set up a “special purpose fund”. It is not realistic. If things are as Musk wants, the deal is meaningless.

Bloomberg even thinks that Musk is the biggest problem for Tesla. His unruly personality and the habit of setting a short-term goal for himself are keeping Tesla away from the best.

However, no matter how things develop, Musk’s attitude is completely known: He really does not like listed companies.

Via.  The Verge