SAN FRANCISCO (Reuters) – Tesla Inc. ( TSLA.O ) CEO Elon Musk said Friday he would heed shareholder concerns and no longer pursue a $ 72 billion deal with his American electric car maker privatizing an idea that had baffled investors and taken regulatory oversight.
FILE PHOTO: Tesla Motors Inc CEO Elon Musk paused during a press conference in Tokyo on September 8, 201
The decision leaves Tesla as a listed company, but raises new questions for the future. His shares traded below their levels on August 7, when Musk announced on Twitter that he was considering taking Tesla privately for $ 420 a share, as investors wondered what the long-term bid for Musk's ability meant to increase the company's profitability control.
This move also results in Musk and Tesla having to fend off a series of investor lawsuits and an investigation by the US Securities and Exchange Commission over the actual correctness of Musk's Tweet that funding for the deal was "secured".
Musk said Friday that his belief that there were more than enough funds to privatize the company was compounded during the trial. He wrote down his decision to give up the offer of shareholders he had received from his shareholders and to convince himself that it was more time-consuming and distracting than expected.
"Although the majority of the shareholders I spoke to said they would stay with Tesla when we were private, the feeling was, in short, please do not do that," musk wrote in on Friday a blog post.
Musk, who owns about a fifth of Tesla, had said this earlier the month in which he intended to take the company privately, without using the standard method of a leveraged buyout where everyone else Shareholders would pay off and the deal would be funded mainly with new debt.
Instead, two-thirds of the Company's shareholders, in his estimation, would have chosen the option to "roll" their shares and continue to be investors in a private company rather than pay out. This would significantly reduce the amount of money needed for the business and further weigh on Tesla's credit, which has a $ 11 billion debt and negative cash flow.
Musk, however, said Friday that a number of institutional shareholders had told him that they had internal compliance issues that would limit their investment in a private company. He added that there is no proven way for most retail investors to keep Tesla private.
Musk had previously said that Saudi Arabia's PIF, which became Tesla's shareholder earlier this year with just under 5 percent stake, could help finance its cash share, despite sources close to the sovereign wealth fund this view. PIF is in negotiations to invest more than $ 1 billion in aspiring Tesla rival Lucid Motors Inc, Reuters reported last Sunday.
Six members of the Tesla Board of Directors said in a separate statement that they were informed on Thursday that Musk is giving up its take-private offer. The board then dissolved a special committee of three directors who had set up to evaluate every offer made by Musk.
"We fully support Elon as it continues to advance the company," said the board.
FOCUS ON MODEL 3
One of Tesla's biggest challenges now is to ramp up production of its latest model 3 vehicle. Several "bottlenecks" at its Fremont factory and outside of Reno, Nevada have delayed series production.
Tesla now aims to consistently build 5,000 Model 3s a week, a target that says it has done "several times" since it only made it one week in June.
Musk has repeatedly said since April that Tesla does not need to raise new capital and has promised to be profitable and cash flow positive in the third and fourth quarters. However, analysts predict that Tesla will spend billions of dollars over the next few years to finance ambitious expansion plans and develop new electric vehicles against German competitors.
The capital-intensive projects in the pipeline include a new roadster, an SUV model Y and an electric big rig. The company's Gigafactory is only partially completed, and Musk has announced that a European plant site will be announced this year. The financing of a new China plant will come from local debt, he said.
The battle for the introduction of the Model 3 coincided with an escalating war between Musk and the short sellers who bet that Tesla's high-priced stocks would decline as the company burned its cash reserves.
Explaining one of his reasons to take Tesla privately, Moschus cited short sellers earlier this month by stating that "being public means that there are a large number of people who have an incentive to attack the company"  Citigroup Inc ( CN ) Earlier this month, analysts wrote in a research report that if a go-private transaction becomes less likely, "Tesla would be wise to try, at least, a significantly new one Gathering equity later than that "can boost investor confidence.
Reporting by Alexandria Sage; Edited by Sam Holmes and Adrian Croft