Tesla Staying Public — Tesla Coverage Going To Spin You Dizzy This Weekend

August 25, 20186 years ago Zachary Shahan 0 Comments

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Word on the street (and initiating on Tesla’s blog) is that Tesla CEO & Chairman Elon Musk has conceded to large investors and decided to keep Tesla public.

“I knew the process of going private would be challenging, but it’s clear that it would be even more time-consuming and distracting than initially anticipated,” Elon wrote. “More time-consuming and distracting than initially anticipated” is unsurprising. On the other hand, my hunch is that he was more or less forced to this conclusion. Or maybe “forced” isn’t the perfect word, but investors at the very least persuaded him to drop the “going private” dream.

“I met with Tesla’s Board of Directors yesterday and let them know that I believe the better path is for Tesla to remain public,” he added. I think this comment is one that actually goes against Elon’s deeper beliefs, but I’m not his psychiatrist and wasn’t a fly on the wall of the discussions, so don’t take my word for it. I’ll explain more in a moment in an update to this article. It’s worth noting briefly, though, that this was the next line: “The Board indicated that they agree.” In other words, Elon wasn’t able to convince the board members that going private was a better option, and more importantly, he wasn’t able to convince large investors who he expected would help him make it happen.

I have much more to write, but in the interest of getting the news out quickly, before I do that, Elon’s full statement is below. And after you read the statement, watch out, Tesla reporters are going to be spinning this news every way by Sunday this weekend.

Update: Below the statement from Elon Musk, I’ve added several more comments. It’s after 1:00am here and I think I’ve summarized my core thoughts enough, but I may add more updates in the morning. Also, I assume we’ll have more to say about this throughout the weekend in other standalone posts. Stay tuned.

By Elon Musk

Earlier this month, I announced that I was considering taking Tesla private. As part of the process, it was important to understand whether our current investors believed this would be a good strategic move and whether they would want to participate in a private Tesla.

Our investors are extremely important to me. Almost all have stuck with us from the time we went public in 2010 when we had no cars in production and only a vision of what we wanted to be. They believe strongly in our mission to advance sustainable energy and care deeply about our success.

I worked with Silver Lake, Goldman Sachs and Morgan Stanley, who have world-class expertise in these matters, to consider the many factors that would come into play in taking Tesla private, and to process all the incoming interest that we received from investors to fund a go-private transaction. I also spent considerable time listening to current shareholders, large and small, to understand what they think would be in the best long-term interests of Tesla.

Based on all the discussions that have taken place over the last couple of weeks and a thorough consideration of what is best for the company, a few things are clear to me:

Given the feedback I’ve received, it’s apparent that most of Tesla’s existing shareholders believe we are better off as a public company. Additionally, a number of institutional shareholders have explained that they have internal compliance issues that limit how much they can invest in a private company. There is also no proven path for most retail investors to own shares if we were private. Although the majority of shareholders I spoke to said they would remain with Tesla if we went private, the sentiment, in a nutshell, was “please don’t do this.”
I knew the process of going private would be challenging, but it’s clear that it would be even more time-consuming and distracting than initially anticipated. This is a problem because we absolutely must stay focused on ramping Model 3 and becoming profitable. We will not achieve our mission of advancing sustainable energy unless we are also financially sustainable.
That said, my belief that there is more than enough funding to take Tesla private was reinforced during this process.

After considering all of these factors, I met with Tesla’s Board of Directors yesterday and let them know that I believe the better path is for Tesla to remain public. The Board indicated that they agree.

Moving forward, we will continue to focus on what matters most: building products that people love and that make a difference to the shared future of life on Earth. We’ve shown that we can make great sustainable energy products, and we now need to show that we can be sustainably profitable. With all the progress we’ve made on Model 3, we’re positioned to do this, and that’s what the team and I are going to be putting all of our efforts toward.

Thank you to all of our investors, customers and employees for the support you’ve given our company. I’m incredibly excited to continue leading Tesla as a public company. It is a privilege.

Update #2:

In talking to our public investors, most were supportive of optimizing for long-term value creation over quarterly earnings. This was also a factor in remaining public.

— Elon Musk (@elonmusk) August 25, 2018

Update #3: The following is an email from Elon Musk to employees that CNBC claims to have obtained:

From: Elon Musk
To: Everybody
Subj. Staying Public

8:34 p.m.

After giving this a lot of thought, I have come to the conclusion that the best path for the foreseeable future is for Tesla to remain a public company.

There are certainly a number of very compelling reasons to go private, so this is far from an obvious decision, but, on balance, being public appears to best serve the interests of the people of Tesla and those who have invested in our future.

Thanks for being awesome,

Elon

Back to me, Zach, here are some initial thoughts:

Good News:

Probably the most powerful statement in the letter, a statement that I assume will largely be ignored, is this one: “That said, my belief that there is more than enough funding to take Tesla private was reinforced during this process.” The money was there. A lot of money was there.

Retail investors can stay in. Woohoo!

Rather than having this entire process behind closed doors and cloaked with NDAs (which probably wouldn’t have been respected by some people anyway), Elon had the innate transparency and the interest of all stakeholders in mind enough that it played out very publicly. The board probably hated that. Certain investors surely hated that. And his PR team may need counseling now. But it was the right thing to do, imho. Thank you, Elon, for thinking of the little people (of which I am one, so I hope no one takes offense at that).

If it is all as it is summarized by Elon — which I have to assume is the case when I consider Elon’s brutal, highly moral honesty — Elon spent a lot of time listening in recent weeks. While he may, especially deep down, wish to take Tesla private, he seems himself as being privileged to serve others in his role, and listening to the wishes of others is often how you serve them.

The humility in that last line, and other parts of the letter. While I think I’ve never seen a critic make note of Elon’s humility, I personally think it is his best asset. It’s always a refreshing and important characteristic, and I think it is good that Elon wears it on his sleeve.

Bad News:

Elon seems to have “failed” at a major objective. That tarnishes his reputation as someone who normally succeeds at what he attempts, no matter how hard it is — and it thus tarnishes Tesla’s reputation as well.

Tesla is staying public.

This news is going to be spun like hell. See next section.

Spinning Shitshow Alert:

The anti-Tesla media shitshow is not going to be silenced — not even that portion of it that’s all about manipulating the stock price.

The anti-Tesla media shitshow just got a huge bucket of ammo. The trolls and critics are going to be claiming day and night that this whole effort was a massive fail, it’s a sign of horrible financial problems, Elon should be in prison, the financing wasn’t there (never mind the clear statement from Elon and the obvious point that he could have gotten the money), and the company is going to collapse any day. By the way, there’s also no demand for the Tesla Model 3, Model S & Model X demand is dropping, and Tesla can’t produce thousands of cars a week anyway. Let the FUD resume.

We’ve got a more systematic response coming. Stay tuned.