Tesla shares drop after Musk abandons buyout plan

Tesla shares drop after Musk abandons buyout plan

As Musk admits: "Although the majority of shareholders I spoke to said they would remain with Tesla if we went private, the sentiment, in a nutshell, was 'please don't do this'".

In a late-night blog post on Friday Musk said that "most of Tesla's existing shareholders believe we are better off as a public company".

Investors in Tesla's bonds and convertible debt also had shown skepticism that the buyout would materialize during the days after that tweet, and a subsequent blog post in which Musk made a case for going private.

It was on August 7 that Musk first surprised investors with his plan by tweeting that he had "funding secured" for a go-private deal, which would have had a value of $72 billion.

Surely, though, it wasn't just because people didn't like it that Musk reversed course.

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The process of going private was expected to be challenging, but now it's clear that it could have been even more time-consuming and distracting than initially anticipated, Tesla's chief executive noted, adding that the company "absolutely" must stay focused on ramping Model 3 production and becoming profitable. On top of that, there were concerns about potential fallout from shareholder lawsuits and the SEC investigation, the people said.

Musk blinked partly because pulling off a buyout might require getting into bed with competitors, according to the Wall Street Journal, which reported that German auto giant Volkswagen was prepared to team up with Silver Lake to invest as much as $30 billion into the endeavor.

Musk had hired advisers including Goldman Sachs Group Inc. and Silver Lake as well as Morgan Stanley.

It remains unclear what Musk meant by "funding secured". The company has said it expects to make 50,000 to 55,000 Model 3s in the quarter, which averages to roughly 4,200 vehicles a week at the higher end of the guidance.

Tesla also said on Sunday it was not searching for a chief operating officer - a No. 2 executive that critics claim Musk badly needs, as his micromanaging ways have lately led to him to sleep on the floor of Tesla's factory in Fremont, Calif. It's created a new layer of questions for investors. People close to Musk have said that he might have been "overly simplistic" in his thinking, the New York Times suggests.

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