Tesla (NASDAQ: TSLA) CEO Elon Musk shocked the investment world earlier this month when he published a surprise tweet that he intended to take the company private, with a proposed buyback of $420 per share. His announcement sent the stock market into a frenzy and Tesla prices soared. Investors who weren’t short traders were excited by the prospects of a buyout, and those who wanted to retain their shares would have had the option to do so, according to Musk.
However, things unraveled almost as quickly as the unexpected announcement was made. There were questions about where the funding for the buyout was coming from, whether it was signed off, and whether the Tesla board of directors were even informed of Musk’s announcement. The SEC became involved, launching an investigation and demanding explanations from the Tesla Board and Elon Musk.
News has now emerged that the company won’t be going private, due to what Musk calls “unexpected difficulties”.
Musk Explains that Investors Didn’t Want the Company to Go Private
In a Tesla blog post published Friday night, Elon Musk told investors that “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 public company.” Musk said in the blog post that investors essentially told him, “please don’t do this.”
According to the blog, the Board of Directors agreed that staying public was the best option.
Hold Stock While Prices Stabilize
This ends what has been a highly speculative August, with investors not sure whether Tesla would go one way or the other. In the same blog post, Musk said that the company will focus its resources on increasing production to meet high demand for Tesla vehicles, particularly the Model 3.
Tesla stock was up 0.85% by the end of Friday trading, but the impact of this latest development had not yet been felt. At premarket this Monday, stock was down 4.40%. Tesla has a current rating of HOLD from most analysts.
Stock prices should stabilize now that clarification on the buyback has been given. Although the news may disappoint some investors, it should also mean a more stable path going forward. There is still potential for Tesla to grow, with the provision that the company is able to increase their production to take advantage of incredibly high demand for their electric vehicles.
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