Trading in Tesla (TSLA) stock resumed late Tuesday, soaring in high volume, after shares were halted due to Chief Executive Elon Musk's tweet saying he was pondering taking the electric-car maker private at $420 a share.
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Musk put out the tweet at 12:48 p.m. Eastern time. A deal taking the company private would cost about $70 billion. Musk maintained that he has the funding.
Musk also is the largest shareholder in Tesla.
"Am considering taking Tesla private at $420. Funding secured."
— Elon Musk (@elonmusk) August 7, 2018
At 420 a share, that's also a 19% premium from where Tesla stock was trading when Musk first tweeted. Shares of Tesla rose 11% to 379.57 on the stock market today.
Trading in Tesla stock was halted shortly after 2 p.m. ET, about an hour after Musk's tweet of taking the company private. It resumed trading at about 3:45 p.m. ET.
Tesla Letter To Employees
Around 3:30 p.m. ET, Musk followed up with a letter to employees.
"First, a final decision has not yet been made, but the reason for doing this is all about creating the environment for Tesla to operate best," Musk said in the letter titled "Taking Tesla Private."
"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," Musk said. He went on to say: "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."
In his letter, Musk made no reference on the deal's funding, as he did in the tweet. Musk did say, however, that he would keep the concerns of shareholders in mind.
"Either they 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%)," he wrote. "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."
Tesla reported second-quarter earnings on Aug. 1 that showed another loss. It did, however, exceed revenue forecasts and defied skeptics in key areas, including Model 3 production.
No Controlling Vote In Tesla Stock
Earlier Tuesday, the Financial Times reported that the Saudi Arabia Public Investment Fund built a stake in Tesla. The stake reportedly is somewhere between $1.7 billion and $2.9 billion, or between 3% and 5%. Saudi Prince Mohammed bin Salman apparently built up the stake after touring the U.S. in March.
The Financial Times report said the Saudi Arabia fund initially approached Musk about purchasing newly issued shares. Musk reportedly rebuffed the offer.
Fred Lambert, editor of Tesla follower Electrek, asked Musk via Twitter if he would retain control over the company.
Musk replied: "I don't have a controlling vote now and wouldn't expect any shareholder to have one if we go private. I won't be selling in either scenario."
Earlier Discussion
Musk has previously said he would like to take Tesla private. He made such a reference in an interview with Rolling Stone published in November 2017.
Musk said companies run best "when there are not perverse incentives for people to try to harm what we're all trying to achieve." That's a reference to the short sellers of Tesla stock.
SpaceX, the rocket ship company Musk built from the ground up serves as an example, he said.
"It is far more operationally efficient, and that is largely due to the fact that it is privately held," he wrote. "This is not to say that it will make sense for Tesla to be private over the long term. In the future, once Tesla enters a phase of slower, more predictable growth, it will likely make sense to return to the public markets."
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