Tesla Inc. shares closed about 11% higher in heavy trading Aug. 7 after CEO Elon Musk confirmed his interest in taking the carmaker private.
"[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," Musk said in an email to employees that was published on the company's website. The CEO went on to say that being private would protect the company from "wild swings" in stock price movements and the pressures of quarterly earnings reports.
Earlier Aug. 7, Musk tweeted that he was considering taking the carmaker private, following reports that Saudi Arabia's sovereign wealth fund acquired about 3% to 5% of shares in the electric vehicle maker. "Am considering taking Tesla private at $420. Funding secured," Musk said on Twitter.
Tesla's shares surged as much as 6% following the tweet, and trading in Tesla shares was halted at 2:08 p.m. ET, resuming at 3:45 p.m. ET.
In his subsequent email to employees, Musk cited short-selling as a factor in his desire to take the carmarker private. "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," Musk said, adding that he does not envision a substantial change to his 20% stake in the company after a potential transaction.
In a tweet sharing the emailed statement, Musk said the only reason a going-private transaction was "not certain" was that such a transaction would carry a shareholder approval contingency — a factor he detailed in the email as well.
"This proposal to go private would ultimately be finalized through a vote of our shareholders," Musk told the company's employees. "If the process ends the way I expect it will, a private Tesla would ultimately be an enormous opportunity for all of us."
Saudi Arabia's Public Investment Fund has amassed a stake in Tesla worth between $1.7 billion and $2.9 billion based on current market prices, the Financial Times reported Aug. 7. The fund initially approached the automaker and Musk about buying newly issued Tesla shares, but it ultimately bought the shares in secondary markets after Tesla did not act on the interest, according to the report, which cited unnamed sources.
The reported deal would make the state fund one of Tesla's biggest shareholders, according to the publication. T. Rowe Price Group Inc. and FMR LLC are the two largest shareholders in Tesla after Musk.
Tesla declined the FT's request for comment on the reported investment.
In his email to employees, Musk said he would like to structure a going-private transaction so that all shareholders would have a choice to stay investors in a private Tesla or be bought out at a premium.
"Either they can stay investors in a private Tesla or they can be bought out at $420 per share, which is a 20% premium over the stock price following our Q2 earnings call," he said.
Musk said he does not plan to merge Tesla and SpaceX, his outer-space exploration company, but he thinks the structure for a private Tesla would be similar in many ways to the SpaceX structure, where external shareholders and employee shareholders have an opportunity to sell or buy approximately every six months. He said SpaceX and Tesla will continue to have separate ownership and structures.