Tesla shares climb after Elon Musk tweets he will take the company private

Tesla shares climbed as much as 13pc on Tuesday night after its mercurial co-founder Elon Musk announced he was considering taking the electric car maker private.

In a series of tweets Mr Musk, who has repeatedly complained about Tesla’s treatment on the public market and clashed with analysts, said he had already secured funding for the plan.

Mr Musk later released a statement, in which he said a final decision had not yet been made on whether to take Tesla private.

However, he said being public meant Tesla was "subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders", and put it under pressure to make short-term decisions that may not be good for the company in the long-term, given the quarterly earnings cycle.

Nasdaq authorities had halted trading following Mr Musk's tweets, as Tesla shares rose sharply, and they continued their climb after trading was resumed later in the evening, ending up 11pc at $379.57 and giving Tesla a value of $65bn (£50bn) -  slightly below their all-time high.

Mr Musk said he could take the company private at $420 per share, compared with Tuesday's  opening price of less than $344. Such a deal would value the company at around $80bn, including debt. 

Harvey Pitt, former chairman of the Securities and Exchange Commission (SEC), said Mr Musk's tweets could land in hot water legally.

“If his comments were issued for the purpose of moving the price of the stock, that could be manipulation, and it could also be securities fraud,” Mr Pitt told CNBC. “The use of a specific price for a potential going-private transaction is highly unprecedented, and therefore raises significant questions about what his intent was. So that would have to be investigated.”

Mr Musk made his announcement soon after it was reported that Saudi Arabia’s sovereign wealth fund had taken a stake of up to 5pc in Tesla, a holding worth as much as $2.9bn. The shares had jumped about 5pc in response.

In the letter, sent to Tesla employees earlier on Tuesday, Mr Musk said all shareholders would have a choice to either stay investors in a private Tesla or be bought out at the $420 per share price.

He said employees would be able to sell their shares periodically, if Tesla were to go private, but that his intention would be for all employees to remain shareholders. 

Answering questions from his followers on Twitter, Mr Musk said Tesla "would create special purpose fund enabling anyone to stay with Tesla,” comparing his plans to Fidelity funds that privately hold shares in his rocket company Space X.

However, while the structure would be similar, he said the intention is "not to merge SpaceX and Tesla".

Why Elon Musk is the Donald Trump of the tech world

He said he was “super appreciative” of Tesla shareholders and would “ensure their prosperity in any scenario”.

Mr Musk, who owns a 20pc stake, told followers he would not sell his own Tesla shares if the company is taken private and would not expect to gain control either.

"This has nothing to do with accumulating control for myself. I own about 20pc of the company now, and I don’t envision that being substantially different after any deal is completed," he said. 

Investors attempted to process the biggest social media bombshell yet from Mr Musk, whose tweets have become a major source of market sensitive information on Tesla’s costly effort to challenge traditional car makers.

George Galliers, analyst at automotive specialists Evercore ISI, suggested the Saudi investment could be linked to plans to take Tesla private. He said: “I understand this is serious and there is substance to it.

“Whether disclosure of the Saudi Arabian stake is coincidental remains to be seen but it seems to be too large a coincidence.”

History of Tesla

Mr Musk has fought an intensifying war of words with Tesla critics, particularly short-sellers betting that its share price will fall. It is the most shorted US company, with about a quarter of its stock on loan to speculators seeking a profit by buying them back at a lower price.

In his letter to employees, Mr Musk said being public had meant "there are large numbers of people who have the incentive to attack the company".

Tesla last week finally hit production targets and revealed slower cash burn, prompting a surge in its shares and an estimated paper losses of $1.7bn for short sellers.

Soon after Mr Musk tweeted a parody video with the words “even Hitler was shorting Tesla stock”. Mr Musk has also labelled short-sellers as “jerks who want us to die” and warned in May that “the short burn of the century [was] comin’ soon”.

He has dismissed analysts for asking “boring, boneheaded” questions which “are not cool”, and instead took queries submitted by YouTube during a recent earnings call. 

The controversial decision caused Tesla’s market value to drop by $4bn, though this has since been recovered. Tesla is valued at 50pc more than Ford despite its losses and relatively small scale. It delivered just 53,339 vehicles in the most recent quarter, compared to sales of 1.5 million for Ford.

Nevertheless, Mr Galliers said Tesla’s development of electric cars is sending shockwaves through the car industry as the Model 3 already dominates sales in the small premium sector.

He said: “Tesla makes a margin on its Model S and X cars which is at the higher end of the industry.

“This is despite Tesla being subscale and unable to secure the sort of contracts the giants can. We’ll have to see what the margins are when it can get a better deal.”

Profile | Elon Musk

At the start of the year Tesla revealed a pay deal for Mr Musk which could earn him $70bn if he gets the company to a $650bn valuation within 10 years.

His combative style has caused friction with Wall Street since Tesla became a public company in 2010. Last year powerful institutional investors criticised Tesla’s governance because of personal or professional links directors had with Mr Musk. The billionaire’s response was a blunt invitation to “buy Ford stock. Their governance is amazing.”

Taking Tesla private could end such tussles. Mr Galliers said: “There’s a history of entrepreneurs getting frustrated by questions they face when they take companies public. The price he’s said is high but maybe when he’s privy to all the details of Tesla he sees it as fair.”