The Saudi-backed scheme to take Tesla off of public markets was too complex, Musk says, as competition mounts from Russia’s Kalishnikov
Shares in electric car maker Tesla dropped just under 3 percent in morning trading on Monday after chief executive Elon Musk abandoned a plan to take the company private.
Musk disclosed his move in a blog post late on Friday, saying consultations carried out with Goldman Sachs and Morgan Stanley had found little support for going private amongst Tesla’s existing shareholders.
Musk had proposed a deal that would have given shareholders the option of remaining with the company, but he acknowledged there was no real way for those shareholders to participate in a private company.
In his initial comments three weeks ago Musk had said going private would remove distractions caused by short-sellers and quarterly targets.
But in the blog post he said a buyout would be “more time-consuming and distracting than initially anticipated”.
Musk announced his idea in a surprise series of posts on Twitter, providing few details but saying funding was “secured”. He later explained that funding would be provided by Saudi Arabia’s sovereign wealth fund.
He had initially suggested investors could be paid $420 (£325) per share, causing a jump in the company’s trading price.
But in the ensuing weeks that price had dropped to around $320, indicating little expectation that a buyout would take place.
In the meantime, short sellers filed lawsuits against Tesla over the affair, while the Securities and Exchange Commission (SEC) said it was considering investigating Musk’s actions.
Some financial analysts suggested that Musk’s unpredictable behaviour, including his use of social media, meant it was time to bring in a chief operating officer.
Tesla said it was not looking to fill such a role.
“While we are always looking for highly talented executives… there is no active COO search,” Tesla said in a statement.
Tesla reiterated in early August that it expects to become profitable in the third and fourth quarters of this year. At the end of the second quarter the company reported a record $718m loss.
It is currently ramping up production of the Model 3 vehicle, and said earlier this year it plans to build a battery and vehicle assembly complex in China.
On top of its other difficulties, Tesla may soon be facing a new rival in the form of the well-known gun maker Kalishnikov.
The arms manufacturer has already branched out into iPhone covers, umbrellas and combat robots, and at a military show this week it announced a planned “electric supercar” that would rival those of Tesla.
While its announced specifications are well below those of a typical Tesla vehicle, however Kalishnikov’s CV-1 does at least feature an eye-catching design inspired by a 1970s Soviet hatchback called the Izh-Kombi.