The largest share buyback in history: what Elon Musk is going to do with Tesla

On Tuesday, Elon Musk once again stunned the market with a bizarre tweet about what Tesla is going to take as a private company if its shares rise to $420 a share. However, this time the billionaire was really not joking - he later clarified his intentions in a series of further tweets and a letter to company employees.

Details

• Theses in the tweets and the letter are the same. Musk believes that Tesla employees (all of whom are shareholders of the company) are distracted by stock price fluctuations, and publicity puts pressure on management, forcing them to make momentary rather than strategic decisions. In addition, publicity gives a large number of people an incentive to try to attack the company and harm it.
• The Tesla CEO expressed hope that current investors will remain shareholders even if the company goes private, promising to create a special fund for them. As an example of what a non-public Tesla ownership scheme would look like, Musk cites his other company, SpaceX, which is not traded on the stock exchange.
• According to Bloomberg, it is not entirely clear what kind of fund Musk is going to create. However, data released by investment firm Fidelity to the regulator suggests that some of its funds have been acquiring SpaceX shares through a series of private placements since January 2015. As of May 31, the Fidelity Growth Company Fund, for example, held $107 million worth of SpaceX paper (read more about it here ). According to Musk, such a system allows Space X to function more efficiently.
• As the businessman noted, he will give shareholders a choice: if they wish, they will be able to sell their shares at $420 (a 20% premium to Tesla's performance in the reporting for the second quarter) or remain in the company by exchanging their shares for shares in a non-public fund. The businessman will not increase his own share of 20% in any case.
• “The final decision [on delisting] has not yet been made,” Musk stressed separately.

Context

• After tweets about the delisting, the company's shares jumped from $340 to $380 - by 11%, and about the same amount remained before the announced buyback price. If the buyout takes place, it will be the largest in history - Tesla's valuation, taking into account debt at a price of $ 420, will be $ 82 billion, 69% of the company's shares are traded on the stock exchange.
• Musk said several times yesterday that funding for the deal has already been secured. It is not clear by whom, but before the businessman's first tweet, it became known that the sovereign wealth fund of Saudi Arabia acquired a several percent stake in Tesla, paying about $ 2 billion for it.

Artem Gubenko