Kames Capital’s Hull smashes Elon Musk over taking Tesla private
Elon Musk, founder and chief executive officer of automotive manufacturer Tesla, announced via Twitter that he was considering taking the firm private at a price of $420/share, thinking of that option as “the best path forward.”
In a email he sent to Tesla’s employees, he said : “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. 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.”
Musk added: “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.”
In the view of Adrian Hull, co-head of Fixed Income at Kames Capital, the “irascible founder and CEO seeks to avoid “old world” scrutiny by taking the company private.”
“The incorrectly priced bond deal from a year ago has barely traded above issue ever since. Fixed income investors in the deal confused the wanderlust of new world technology and equity price performance with being a good bond. Suffice to say, it was not one for us. Taking the company private has little material impact on the bond (up a couple of points yesterday) but expectations of change of control benefit (redemption at 101 likely misplaced). The bigger question is who’d want to spend that when you could buy a couple of luxury German car manufacturers for the same price?”