Tesla’s (TSLA) stock price dropped as much as 5% in pre-market trading after CEO Elon Musk announced that he is letting go the idea of taking Tesla private.
We now learn that he thought he was “now or never” because he sees Tesla surging on Wall Street in the coming months and Volkswagen reportedly tried to invest Tesla.
According to sources involved in the take-private deal who talked to the Wall Street Journal, banks and advisors put a deal together that involved Volkswagen and Silver Lake:
“By Wednesday evening, they had a presentation for Mr. Musk, proposing a roster of deep-pocketed investors, including Volkswagen and Silver Lake itself, that had agreed to contribute as much as $30 billion, people familiar with the matter said.”
Musk reportedly didn’t like the deal as he believed it would give Volkswagen too much influence over Tesla.
He also didn’t like that many retail and institutional investors would be pushed out. He wrote in a blog post Friday:
“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.”
At first, the CEO seemed to think that there would be a way around this and it’s why he pushed for the deal before having all the details ironed-out.
Now Musk says that it was also because he thought it was: now or never”.
He wrote in an email to the Wall Street Journal:
“In my opinion, the value of Tesla will rise considerably in the coming months and years, possibly putting any take-private beyond the reach of any investors. It was now or perhaps never.”
Musk has been predicting a big short squeeze and a rise in the stock price for a while now, but it has yet to materialized.
He has been guiding for Tesla to become slightly profitable by the end of the year, which could be the catalysis that makes his prediction come true.
I find it weird that the stock is falling by as much as 5% following this news because the biggest piece of information out of this to me is clearly that investors, including Volkswagen and Silver Lake, were willing to put as much as $30 billion in Tesla at $420 per share.
That deal was apparently on the table, Musk just didn’t like it.
But I can get how it reflects badly on Musk that he jumped the gun in announcing the deal before ironing out those important details.
I suppose that now the best for Musk to accomplish most of what he wanted to do with the take-private deal is to make sure Tesla becomes profitable in the short-term, which should remove pressure from the short sellers and give Tesla more breathing room.
What do you think? Let us know in the comment section below.