Should Elon Musk have taken Tesla Private?


Things looked very good for the Tesla (TSLA) in August. The company reported better-than-expected second quarter earnings and investors were optimistic about what the company could do in the second half of 2018.

After all, Tesla burned less money than expected, increased expenditures, and increased Model 3 production through meaningful measures. Management maintained its prospect of positive and profitable free cash flow quarters in the third and fourth quarters.

The results ignited the stock, pushed it to $ 360 and threatened to erupt with new record highs. The shorts were in trouble and CEO Elon Musk probably thought he was about to throw gas into the fire. Instead, he poured cold water over it.

He tweeted that he intended to take Tesla private at $ 420 per share and he had "secured financing." Even more shocking, he sent the tweet during the trading day, confusing almost everyone who follows the stock. Why is stock not standing? Has anyone hacked the Musk Twitter account (TWTR)? If not, is it for real?

All these questions and more came up. Enthusiasts applauded the movement. Veterans of the long-standing stock market – such as Stephen "Sarge" Guilfoyle – were surprised that Musk was so arrogantly forgotten in the financial market. "Yes, I take offense when you mock our financial market," he argued. Some people cleaned up by shortening their actions when they were filled with craters.

As a result of his actions, Musk was investigated by the SEC, fined $ 20 million and must resign as chief executive in the next three years. But should he have just found a way to make it work? Maybe his funding was not guaranteed after all. It might be very difficult to keep the longtime investors who believe in Tesla on board in a closed deal.

Regardless, some say he should have gone private. Specifically, Tim Draper, a Silicon Valley venture capitalist and initial investor for Tesla and Musk's other company, SpaceX, says Musk would have spared him some trouble in doing so.

It was a "human" mistake to send the tweet, Draper told the Web Summit conference in Lisbon on Tuesday. Having said that, he also argued that Musk "probably should have taken the whole thing private."

At this point, I'm not sure going private would take Musk and Tesla out of the limelight. Much like Uber, a company of this size is hard to maintain for long. But because it is a private company, Tesla would be relieved of its many obligations as a public company: quarterly reports, filings with the SEC, exchange requirements and many other obstacles would be eliminated.

But also Tesla's access to public markets. Would that matter? Maybe not anymore. In several teleconferences this year with analysts, Musk has stated his desire that Tesla no longer rely on foreign money to finance Tesla's operations. This includes vehicle manufacturing, R & D efforts and expansion.

How to Swap Tesla Stocks After Your Crazy Month

Whether Tesla's cash flows will remain as strong as in the third quarter are under debate. But if Tesla does not have to rely on capital increases through the sale of shares, Do not do needs more of the public markets. You can still raise debt and there is plenty of investment money floating around the bay area looking for a home.

Musk would have less headache as a private company, but for now, it does not look like that will be the case. We'll still be watching TSLA for a while, it seems.

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