Tesla CEO Elon Musk, hours following a tweet that set the industry abuzz saying he is considering taking his company private, on Tuesday said "I think this is the best path forward" -- adding that "a final decision has not been made."
At 12:48 p.m. Eastern Daylight Time, Musk’s account said, "Am considering taking Tesla private at $420. Funding secured." At 2:08 p.m., trading of Tesla shares was halted at $367.25, up 7.4 percent over Monday’s close. Trading resumed at 3:45 p.m. The shares finished the day up 11 percent at $379.57.
At 3:28 p.m., Tesla tweeted a link to a blog posting on its website titled "Taking Tesla Private," in which Musk said: "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 Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term. Finally, as the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company.
"I fundamentally believe that we are at our best when everyone is focused on executing, when we can remain focused on our long-term mission, and when there are not perverse incentives for people to try to harm what we’re all trying to achieve," he said.
At $420 per share, a deal would represent a 23 percent premium to Tesla's closing price on Monday.
Musk's rationale for $420 a share? "Either [shareholders] can stay investors in a private Tesla or they can be bought out at $420 per share, which is a 20% premium over the stock price following our Q2 earnings call (which had already increased by 16%). My hope is for all shareholders to remain, but if they prefer to be bought out, then this would enable that to happen at a nice premium," he said.
There was no indication where Musk would get his financing for such a massive transaction.