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Elon Musk looking to privatize Tesla

Tuhin Guha  | Updated: August 09, 2018, 10:41 AM IST

In an announcement via his Twitter handle, Elon Musk said that he wanted to turn Tesla from a public company listed on the stock market into a private one. This means having to buy out shares from the public at a rate higher than the stock prices. Musk stated that he had received funding to make this buyout happened at $420/share, against the $340 stock price going around at the time.

Tesla CEO Elon Musk at the opening of the company's first Supercharger fast charge station in the UK. Musk hopes the more freely available patents will speed up EV development

This announcement comes after reports that Saudi Arabia had invested $2.9 billion in the company, building up a stake of around 5%. Soon after the tweet, Tesla stock prices jumped by over 7%.

In a letter sent out to Tesla employees discussing this development, Musk said that a final decision has not yet been made in this regard, but the reason for doing this was all about creating an environment for Tesla to operate best. He also stated that gaining more control over the company was not a reason behind this move, given that his interst in the company wouldn't increase even after privatization.

The main rationale behind this move is to counter the wide swings in the company's stock prices. This shows most investors are looking at the company as a short-term prospect, hampering the firms long term ambitions.

While Tesla has doen well to make inroads into the luxury end of the car business and has caused some major disruption in the field of EVs, it is still facing teething troubles in growing production capacity. This strategic move should help with these issues as well.


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