Tesla Stock is Up as Elon Musk Hints at a Buyout

August 8, 2018
903 Views

Tesla (NASDAQ: TSLA) has been one of the most popular tech stocks in recent years. While short traders have had a rough ride due to it’s volatility, long-term investors have considered the company to be a great option for growth.

Now investors have been hit with an unexpected piece of news, but one that could turn out to be profitable. CEO Elon Musk has told investors that he is considering a full stock buyback to take the company private.

Tesla Could Be the Biggest Buyout in History

Elon Musk confirmed in a tweet that funding had been secured to buy back the company stock at $420 per share. This sent the market into a frenzy yesterday, and Tesla went up 10.99% on the NASDAQ.

Texas Utility was previously the record holder with a buyout that was worth just over $30B. It’s, if it goes ahead, will be worth more than $70B.

Long term investors who hold stock today will stand to make money. At the close of trading on Tuesday the 7th of August, TSLA was trading at $379.57. Investors will have the option to sell their public shares, or transfer to ownership of private shares.

Short sellers, who rely on stock price declines to make money, will take a significant hit if Tesla does proceed with a buyout. Even with current stock prices, it is estimated that short sellers are collectively down $1.5B.

Why Does the Company Want to Go Private Again?

In the case of Tesla, Elon Musk believes that public stock trading is detrimental to business.

In a letter to employees, Musk said that “As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders. Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on the company to make decisions that may be right for a given quarter, but not necessarily right for the long-term.”

If the funding that Tesla claims to have is real, then traditional investors will need to closely watch this situation. Short traders will need to weigh their options and decide whether to continue trading with the risk of a buyout coming swiftly. As for the future, Elon Musk has not ruled out a return to the stock market, stating that “Once the company enters a phase of slower, more predictable growth, it will likely make sense to return to the public markets.”

You may be interested

Job Hiring is Picking Up as Employers and Consumers Gain Confidence
Economy
559 views
Economy
559 views

Job Hiring is Picking Up as Employers and Consumers Gain Confidence

Lamont J - March 29, 2021

The recent government stimulus for small and medium-sized businesses, personal stimulus checks, and declining Coronavirus cases, are all great news…

Fed Could Maintain 0% Interest Rate Until 2024
Economy
500 views
Economy
500 views

Fed Could Maintain 0% Interest Rate Until 2024

Adam R - March 26, 2021

The Federal Reserve is holding its target interest rate in a range of 0.00% - 0.25%, even while the economy…

Supply Constraints Could Slow the Home Market
Economy
566 views
Economy
566 views

Supply Constraints Could Slow the Home Market

Becky H - March 25, 2021

Low inventory has been a constant in the home market for more than a year. The supply of existing and…