Tesla Considers Going Private
Elon Musk is notorious for his outspoken statements on Twitter regarding announcements of Tesla and just being himself - a funny, ambitious individual. Well, on August 7, he went beyond his typical style and tone when he commented on a possibly eventual change to Tesla, which could greatly impact its business and its quest towards profitability. On that day, he tweeted that he was considering taking the company private, just after reports came out that Saudi Arabia invested $2B in Tesla and just one week later from reporting earnings.
Using social media to announce such a large-scale change is unprecedented. His proclamation allowed the stock to rise 7%, which prompted the stock to temporarily cease trading as the SEC became doubtful whether Elon Musk's tweet was legitimate and not used for manipulative tactics to artificially increase the stock price. Additionally, Musk claimed that he had "funding secured" to ensure the action, but the sources for this funding are currently unknown. He further mentioned that the shares would be bought at $420 per share, or the shareholders can remain as private investors.
So why is Elon Musk considering this action? As he wrote in his letter to the employees, by being private, Tesla won't be pressured by quarterly earnings to meet the results for the short-term and possibly jeopardize its long-term goals. This structure will also allow Tesla to avoid short investors, who, Musk claims, "have the incentive to attack the company." Tesla is the most shorted stock in the U.S. stock market as investors doubt Musk's bold statements about attaining profitability. Many blame Elon Musk for this crisis, and there have been previous attempts to remove him of his position as CEO of the company as he already is CEO of SpaceX and the Boring Company.
Tesla is well-known for its consistent cash difficulties as each consecutive quarter, the company is further in debt, and its ambitions for profitability become more distant. In fact, in the most recent quarter, Tesla lost $717 million, its biggest loss ever. Despite this, investors were pleased with the consistent increasing production of the Model 3s, reaching 40,000 and surpassing expectations of 38,000.
But will becoming private allow Tesla to raise more cash and retain investor support? To better understand Tesla's current condition and its cash problems, watch the video below.
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Using social media to announce such a large-scale change is unprecedented. His proclamation allowed the stock to rise 7%, which prompted the stock to temporarily cease trading as the SEC became doubtful whether Elon Musk's tweet was legitimate and not used for manipulative tactics to artificially increase the stock price. Additionally, Musk claimed that he had "funding secured" to ensure the action, but the sources for this funding are currently unknown. He further mentioned that the shares would be bought at $420 per share, or the shareholders can remain as private investors.
So why is Elon Musk considering this action? As he wrote in his letter to the employees, by being private, Tesla won't be pressured by quarterly earnings to meet the results for the short-term and possibly jeopardize its long-term goals. This structure will also allow Tesla to avoid short investors, who, Musk claims, "have the incentive to attack the company." Tesla is the most shorted stock in the U.S. stock market as investors doubt Musk's bold statements about attaining profitability. Many blame Elon Musk for this crisis, and there have been previous attempts to remove him of his position as CEO of the company as he already is CEO of SpaceX and the Boring Company.
Tesla is well-known for its consistent cash difficulties as each consecutive quarter, the company is further in debt, and its ambitions for profitability become more distant. In fact, in the most recent quarter, Tesla lost $717 million, its biggest loss ever. Despite this, investors were pleased with the consistent increasing production of the Model 3s, reaching 40,000 and surpassing expectations of 38,000.
But will becoming private allow Tesla to raise more cash and retain investor support? To better understand Tesla's current condition and its cash problems, watch the video below.
Related Articles:
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