Four days after Tesla’s fourth-largest shareholder urged “a time of quiet and peace,” chief executive Elon Musk lobbed one of his nastiest stink bombs yet: an accusation about an organizer of the Thailand cave rescue that investors say is a major distraction from his mission running the embattled automaker.

Vernon Unsworth, a British diver who played a key role in the saving of 12 boys trapped in a flooded cavern, had said Musk’s unattempted idea of dispatching a miniature submarine “had absolutely no chance of working” and was “just a PR stunt.”

But Musk took the brawl one step further, ranting to his 22 million Twitter followers on Sunday that Unsworth was a pedophile who “really did ask for it.” Pressed to explain the accusation, Musk instead doubled down: “Bet ya a signed dollar it’s true.”

Elon Musk denies early orders being canceled for Model 3 – but new demand may be slipping anyway

Sat, 21 July 2018

Recently, Elon Musk lashed out at a new analysis claiming that nearly a quarter of the more than 400,000 advance reservations for Tesla's Model 3 battery-sedan have been canceled.

But a closer look at Musk's comment raises a different reason for concern: The prospect that new orders may not keep up with Tesla's long-awaited production ramp-up at it's suburban San Francisco assembly plant.

When it opened the order bank up ahead of the Model 3 production launch in July 2017, Tesla saw a rapid burst of reservations, complete with $1,000 deposits. But with many potential buyers still uncertain about when they might be able to actually take delivery, investment bank Needham & Company on Thursday issued a report claiming 24 percent of those reservations have been canceled – which echoed a June study by data site SecondMeasure, which estimated a 20 percent cancellation rate.

A spokesman for Tesla told CNBC that, as of June 31, “The remaining net Model 3 reservations count at the end of Q2 still stood at roughly 420,000, even though we have now delivered 28,386 Model 3 vehicles to date.”

For those who are now translating reservations into actual orders, as well as new customers, the spokesman added, delivery will come in “approximately one to three months.” Meanwhile, three people who placed early reservations spoke told CNBC they have heard from Tesla in recent weeks, indicating they could take delivery even sooner than that.

But the numbers don’t necessarily add up. As the second quarter ended, Musk announced that the carmaker had hit its revised goal, producing 5,000 Model 3 sedans during the final week of June. Tesla has now set a goal of reaching 6,000 a week within the next month and, longer-term, is aiming for the original target of around 8,000 weekly. That was the figure Musk had announced previously, before things headed south at the Fremont, California assembly plant.

Even at that highest figure, it should take more than a full year for Tesla to meet existing reservations, assuming everyone does follow through in turning those into orders. And that doesn’t take into account brand new orders, like the 5,000 Musk claimed to have received last week.

In other words, if Tesla can get you a Model 3 in no more than three months, it suggests that either more reservation-holders have backed out than it claims — or that a high percentage have so far declined to transform those reservations into actual orders.

Only time will tell how many of those original reservations actually translate into sales. So far, it is difficult to track down hard data, though there have been anecdotal reports by competing dealers in California. Some are selling the long-range Chevrolet Bolt EV, and have said they've seen customers cancel out on a Tesla.

However, the potentially bigger concern was flagged by Musk himself. If Tesla is only taking in about 5,000 new orders a week, that means it will already be slipping behind production in the months to come. As it steadily fulfills early reservations, it may have a demand shortfall on its hands.

There are a number of reasons why new orders aren’t keeping pace, according to industry observers. Despite Tesla’s promise of a quick delivery, Tesla simply can’t fulfill everyone’s order for as much as a year — and new customers would likely go to the back of the line.

A long wait might not bother customers for high-line products like the Tesla Models S and X, according to analyst Dave Sullivan of AutoPacific, Inc. They typically already own several other cars they could fall back on. For mainstream buyers, the Model 3 is more likely to be their only set of wheels, and at some point the customer's patience could run out.

In an e-mailed response, the Tesla spokesman said the company isn’t worried about the relatively slow pace of new orders. “When we start to provide customers an opportunity to see and test drive the car at their local store, we expect that our orders will grow faster than our production rate,” the company said. And the addition of more Model 3 variants, also should boost demand, the spokesperson added.

But not everyone is so sanguine. Longer-term, there is the issue of federal tax credits. Depending upon the package a buyer opts for, a $7,500 credit amounts to as much as a 21 percent discount on a Model 3.

Just this week, Tesla confirmed it had sold its 200,000th electric vehicle in the U.S., the benchmark at which tax incentives begin a slow phase-out. Those who take delivery before the end of the year will continue to receive the full credit, but the incentives will be halved during the first six months of 2019, then halved again from July to the end of December. The tax credit will completely expire as of January 2020.

Unless they somehow can jump the line, those placing new orders would be the least likely to get any money from the feds.

That could create more headaches for Tesla going forward. Demand for new models typically peaks in the first 12 to 18 months, according to industry data. That said, the battery-car business is so new it’s not yet clear if that precedent applies here.

Still, further complicating matters is that electric vehicle buyers will get plenty of new alternatives over the next 24 months, with the launch of long-range models from Volkswagen, Volvo, Audi and others. General Motors has two more models coming by mid-2019, though it’s also set to soon cross the 200,000 sales threshold. Most other automakers will retain tax credits past 2020.

Tesla has bet big on the Model 3, and Musk has promised that the mainstream model will allow the company to deliver a profit and positive cash flow for the second half of 2019. With that in mind, Tesla needs to be able to sell every one that rolls out of the Tesla plant. A fall-off in orders, or a sharp rise in cancellations, would cause some serious headaches.

Tesla Asks Suppliers for Cash Back to Help Turn a Profit

Electric-car company, in memo, asks supplier to return a meaningful portion of money spent since 2016

July 22, 2018

Tesla Inc. has asked some suppliers to refund a portion of what the electric-car company has spent previously, an appeal that reflects the auto maker’s urgency to sustain operations during a critical production period.

The Silicon Valley electric-car company said it is asking its suppliers for cash back to help it become profitable, according to a memo reviewed by The Wall Street Journal that was sent to a supplier last week. Tesla requested the supplier return what it calls a meaningful amount of money of its payments since 2016, according to the memo.

The auto maker’s memo, sent by a global supply manager, described the request as essential to Tesla’s continued operation and characterized it as an investment in the car company to continue the long-term growth between both players.

While Tesla said in the memo that all suppliers were being asked to help it become profitable, it is unclear how many were asked for a discount on contracted spending amounts retroactively. Some suppliers contacted about the request said they were unaware of such a demand.

Tesla declined to comment on the specific memo. But it confirmed it is seeking price reductions from suppliers for projects, some of which date back to 2016, and some of which haven’t been completed. The company called such requests a standard part of procurement negotiations to improve its competitive advantage, especially as it ramps up Model 3 production.

The surprising requests raise further questions about Tesla’s cash position, which has dwindled after it struggled to boost production of its first car designed for mainstream buyers, the Model 3. After months of delays, Tesla last quarter reached its longstanding goal of making 5,000 Model 3s in a single week, which, if sustained, will help it generate cash.

Auto makers and suppliers have complicated relationships, each fighting for the best deal under immense pricing pressure. Supply-chain consultants say sometimes auto makers will demand a reduction in price for a current contract going forward or use leverage of awarding a new deal to get upfront savings on a contract. But they say it is unusual for an auto maker to ask for a refund for past work.

Dennis Virag, a manufacturing consultant who has worked in the automotive industry for 40 years, said a solicitation like Tesla’s could put suppliers in financial peril and jeopardize its future supply of car parts.

“It’s simply ludicrous and it just shows that Tesla is desperate right now,” he said. “They’re worried about their profitability but they don’t care about their suppliers’ profitability.”

Tesla has sought to balance its desire for rapid growth with paying for the expensive launch of new vehicles and building out infrastructure to compete against much larger auto makers.

Chief Executive Elon Musk has said he wants to avoid raising additional cash, promising the company can become cash-flow positive with the continued Model 3 build rate and turn a profit in the second half of the year. Many analysts expect Tesla eventually will need to raise more money.

Tesla has been burning cash at a rate of about $1 billion a quarter, and finished the first quarter with $2.7 billion in cash on hand. Tesla pledged to pare back planned capital expenditures this year to less than $3 billion from $3.4 billion last year. Its loss attributable to common shareholders in the first quarter was $710 million, the fifth consecutive quarter of record losses.

Tesla will need to pay down a $230 million convertible bond this November if its stock doesn’t reach a conversion price of $560.64, and a $920 million convertible note next March if the stock doesn’t reach $359.87. Shares closed Friday at $313.58, and are down about 4.5% over the past 12 months.

As part of Tesla’s bid to become profitable, Mr. Musk cut Tesla’s workforce by 9% in June and promised to slow other spending as well. He’s become focused intently on becoming cash-flow positive, a person familiar with his thinking said.

Last month, he told employees in an email: “What drives us is our mission to accelerate the world’s transition to sustainable, clean energy, but we will never achieve that mission unless we eventually demonstrate that we can be sustainably profitable. That is a valid and fair criticism of Tesla’s history to date.”

As a younger company, Tesla indicated it had trouble getting the attention of some of the most important suppliers. Mr. Musk has complained in the past that he wasn’t getting parts makers’ best teams, but he has said that changed with the Model 3.

Tesla has made changes with its suppliers in the past to help preserve its cash position.

In August, Mr. Musk told analysts Tesla was able to negotiate longer payment terms to about 60 days for Model 3 parts, in what he described as “the nirvana” that would allow the auto maker to make the car and get paid for it before the bill is due to suppliers.

“Obviously, that’s like the promised land right there,” he said.

Tesla earnings: Gear up for more drama after Model 3 production burst

July 30, 2018

Earnings: Analysts polled by FactSet expect Tesla to report a second-quarter adjusted loss of $2.88 a share, compared with an adjusted loss of $1.33 in the second quarter of 2017. Crowdsourcing platform Estimize, which gathers estimates from buy-side analysts, hedge-fund managers, company executives, academics and others, has a consensus loss of $2.71 a share.

Revenue: Analysts surveyed by FactSet expect sales to rise to $3.99 billion in the quarter, from $2.79 billion in the year-ago period. Estimize is calling for sales of $3.89 billion.

Other issues: Tesla could announce fresh Model 3 reservation numbers in the wake of a change in the way the company handles the deposits for the car. The company said earlier this month it had about 420,000 reservation holders.

Earlier this month, Tesla did away with the $1,000 refundable deposit to hold a spot in line for the Model 3. it opened up Model 3 reservations for anyone willing to shell out a nonrefundable “order payment” for delivery in the coming months.

That cash infusion could go a long way toward fueling Tesla’s broader plans, which include making and selling all-electric semi trucks, compact SUVs, and pickup trucks, not to mention its solar energy and energy storage business.

Tesla earlier this month reported it produced 53,339 vehicles in the second quarter. It said it expects to be making 6,000 Model 3s a week by late August.

It delivered 40,740 vehicles, of which 18,440 were Model 3, 10,930 were Model S, and 11,370 were Model X.

Those Model 3 deliveries were short of consensus expectations, part of the reason analysts at Goldman Sachs earlier this month kept their sell rating on the stock and their bearish stance overall on Tesla.

In a research note earlier this month, the Goldman analysts noted that at 420,000, the net number of reservation holders has decreased from the roughly 455,000 Tesla disclosed around the July 2017 Model 3 unveiling.

Tesla may not have actively sold the Model 3, but “enough media attention and announcements” about the Model have proliferated the customer base,” the Goldman analysts said. “In that vein, an incremental push to increase demand likely resembles traditional auto OEMs (where incentives are layered on to vehicles to help stimulate purchases) — and could be a headwind to margins.”

Analysts at Argus disagreed, saying they assume “strong demand for the new Model 3” alongside continued revenue gains for the Model S and Model X. They said they expect “significant sequential improvement” in the second quarter, with the Model 3 becoming Tesla’s top-selling vehicle and costing less for Tesla to build in 2019.

“We thus expect the company to achieve its target gross margin of 25% on the Model 3 in late 2019, in line with the margins already achieved on the Model S and Model X,” they said in a note Wednesday.

On Thursday, analysts at Needham downgraded their view of Tesla stock to their equivalent of sell, based on expectations of slower sales of the Model S and Model X, slower gross-margin improvement for Model 3, the negative impact on gross margins as revenue from emissions credits decline next year, and Tesla’s “unsustainable capital structure” with a projected $6 billion free cash-flow burn through 2020 and a $1.486 billion note due in 2019, they said.

UBS predicts Tesla shares will drop 30% in 12 months as company likely to raise capital

July 30, 2018

Tesla shares will fall significantly because the company will not be profitable in 2019, according to UBS.

The firm reaffirmed its sell rating for Tesla shares, predicting the carmaker will report second-quarter earnings per share below expectations.

"We are cautious on TSLA Q2 results … Q2 results [will] likely highlight cash flow and profit challenges," analyst Colin Langan said in a note to clients entitled "Is the pricing strategy a prelude to a capital raise?" Sunday. "The market should not ignore fundamental headwinds that persist with regards to TSLA's Model 3 profitability, stationary storage, and solar … we believe TSLA will eventually need additional outside funding."

Langan reaffirmed his $195 12-month price target for Tesla shares, representing 34 percent downside from Friday close.

The analyst noted the current available Model 3 ordering configurations are at higher price points, ranging from $49,000 to $80,000 per vehicle.

"We do not see sustainable profitability in the second half; however, given the higher priced initial mix, a Q3 profit is possible if TSLA can average production of over 3k/week. We expect margins to correct in 2019 as the mix normalizes toward a long term average," he said. "Our Sell thesis remains focused on cash burn, sustainable profitability, and quality concerns."

In May, Tesla said it expects positive GAAP net income in its third and fourth quarters.

The analyst lowered his Tesla second-quarter earnings per share forecast to a $3.00 loss from a $1.71 loss versus the Wall Street consensus of $2.88 loss. He raised his third-quarter earnings per share projection for the company to a positive 72 cents from a 81 cent loss, but lowered his 2019 earnings per share estimate to $1.65 loss from $1.15 loss versus the $2.34 consensus.

The 'Big Short' Steve Eisman is now betting against Tesla

July 27, 2018

Steve Eisman, the investor whose prescient financial crisis forecast was featured in "The Big Short," is shorting electric automaker Tesla.

The portfolio manager called the company's founder Elon Musk a "very smart man" but raised concern about the CEO's ability to follow through on lofty ambitions.

"He's got execution problems," Eisman, portfolio manager at Neuberger Berman, said in a Bloomberg Television interview Friday. "He's nowhere in autonomous driving, as far as I can tell, and big competition is coming in his space next year."

Eisman is one of the few investors to successfully bet against subprime mortgage securities during the financial crisis, and was a main character in Michael Lewis' best-selling book "The Big Short." Eisman was depicted by actor Steve Carell in the movie, based on Lewis's book.

Tesla's cash position has been an issue in the eyes of investors.

The stock fell earlier this week after The Wall Street Journal cited a Tesla memo that asked a supplier last week to refund a portion of previous payments made by the company in a bid to make a profit. Following that report, insurance on Tesla's debt, which is sold as a credit default swap contract, rose to its second-highest price ever, implying that the company has a bigger risk of default.

Tesla has repeatedly said it doesn't need the cash, and Elon Musk responded to the report in a tweet, saying, "Only costs that actually apply to Q3 & beyond will be counted. It would not be correct to apply historical cost savings to current quarter."

Tesla lost nearly $2 billion last year and burned through about $3.4 billion in cash after capital investments. It had $2.7 billion in cash at the end of the March quarter.

In July 2018, Model 3 not only had the #1 market share position in its segment in the US, it outsold all other mid-sized premium sedans combined, accounting for 52% of the segment overall. The popularity of Model 3 is a true testament to the product. Based on trade-insthat we’ve received so far, we can see that the total addressable market for Model 3 is much larger than mid-sized premium sedans. We are drawing customers from many other segments, including non-premiums sedans and hatchbacks.

During the month of July, we have repeated weekly production of approximately 5,000 Model 3 cars multiple times while also producing 2,000 Model S and X per week. Having achieved our 5,000 per week milestone, we will now continue to increase that further, with our aim being to produce 6,000 Model 3 vehicles per week by late August.

We aim to increase production to 10,000 Model 3s per week as fast as wecan. We believe that the majority of Tesla’s production lines will be ready toproduce at this rate by end of this year, but we will still have to increase capacity in certain places and we will need our suppliers to meet this as well. As a result, we expect to hit this rate sometime next year.

Earlier today, I announced that I’m considering taking Tesla private at a price of $420/share. I wanted to let you know my rationale for this, and why I think this is the best path forward.

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.

I fundamentally believe that we are at our best when everyone is focused on executing, when we can remain focused on our long-term mission, and when there are not perverse incentives for people to try to harm what we’re all trying to achieve.

This is especially true for a company like Tesla that has a long-term, forward-looking mission. SpaceX is a perfect example: it is far more operationally efficient, and that is largely due to the fact that it is privately held. 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.

Here’s what I envision being private would mean for all shareholders, including all of our employees.

First, I would like to structure this so that all shareholders have a choice. Either they can stay investors in a private Tesla or they can be bought out at $420 per share, which is a 20% premium over the stock price following our Q2 earnings call (which had already increased by 16%). My hope is for all shareholders to remain, but if they prefer to be bought out, then this would enable that to happen at a nice premium.

Second, my intention is for all Tesla employees to remain shareholders of the company, just as is the case at SpaceX. If we were to go private, employees would still be able to periodically sell their shares and exercise their options. This would enable you to still share in the growing value of the company that you have all worked so hard to build over time.

Third, the intention is not to merge SpaceX and Tesla. They would continue to have separate ownership and governance structures. However, the structure envisioned for Tesla is similar in many ways to the SpaceX structure: external shareholders and employee shareholders have an opportunity to sell or buy approximately every six months.

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

Basically, I’m trying to accomplish an outcome where Tesla can operate at its best, free from as much distraction and short-term thinking as possible, and where there is as little change for all of our investors, including all of our employees, as possible.

This proposal to go private would ultimately be finalized through a vote of our shareholders. If the process ends the way I expect it will, a private Tesla would ultimately be an enormous opportunity for all of us. Either way, the future is very bright and we’ll keep fighting to achieve our mission.

Thanks,
Elon

Burning cash and upcoming debt maturities

Tesla’s free cash flow was about a negative $3.5 billion in 2017 due to its $3.4 billion in capital expenditures, Moody’s is concerned about the company’s large capital expenditures and the $1.15 billion in debt that matures in the next 12 months. There is:

$230 million due in November 2018

Issued in October 2013 by SolarCity
2.75% convertible notes
Conversion price of $560.64

$920 million due in March 2019

Issued in March 2014
0.25% convertible notes
Conversion price of $359.87

It will be extremely difficult for Tesla’s shares to hit the $560.64 conversion price, but the $230 million should be manageable. It is the $920 million a year from now that is more challenging . The company’s shares have traded above $360 so they could get back there. However, management should plan on having to pay it off vs. hoping for the debt to be converted to shares.

$2.2 Billion of cash and cash equivalents at Q2-end, expected to grow in Q3 and Q4

Capex projection in 2018 adjusted to < $2.5 Billion

We have significantly cut back on our capex projections as a result of our revised strategy to grow capacity with our existing Model 3 lines rather than adding all new lines. Our total 2018 capex is expected to be slightly below $2.5 billion, which is significantly below the total 2017 level of $3.4 billion. Ultimately, our capital expenditure guidance will develop in line with Model 3 production and profitability. We will be able to adjust our capital expenditures depending on our operating cash generation.

If Tesla’s stock price stays around current levels, convertible investors, such as Soros, can reclaim the notes’ face value when they come due, a profitable trade if Soros bought them at a discount when the bonds were under pressure.

Soros Fund Management LLC took a $35 million stake in the Tesla convertible bonds due in March 2019, according to a filing with the U.S. Securities and Exchange Commission. Soros’ spokesman did not respond to questions.

In the case of the Soros’ Tesla notes that rate was initially set at a conversion price of $359.87, higher than the $286.48 per share the stock trades at today.

If Tesla’s stock rallies past its conversion rate, Soros could swap his Tesla notes into more than 97,000 shares of Tesla common stock, according to the bond’s prospectus and Soros’ filing.

Last week, Elon opened a discussion with the board about taking the company private. This included discussion as to how being private could better serve Tesla's long-term interests, and also addressed the funding for this to occur. The board has met several times over the last week and is taking the appropriate next steps to evaluate this.

As I announced last Tuesday, I’m considering taking Tesla private because I believe it could be good for our shareholders, enable Tesla to operate at its best, and advance our mission of accelerating the transition to sustainable energy. As I continue to consider this, I want to answer some of the questions that have been asked since last Tuesday.

What has happened so far?
On August 2nd, I notified the Tesla board that, in my personal capacity, I wanted to take Tesla private at $420 per share. This was a 20% premium over the ~$350 then current share price (which already reflected a ~16% increase in the price since just prior to announcing Q2 earnings on August 1st). My proposal was based on using a structure where any existing shareholder who wished to remain as a shareholder in a private Tesla could do so, with the $420 per share buyout used only for shareholders that preferred that option.

After an initial meeting of the board’s outside directors to discuss my proposal (I did not participate, nor did Kimbal), a full board meeting was held. During that meeting, I told the board about the funding discussions that had taken place (more on that below) and I explained why this could be in Tesla’s long-term interest.

At the end of that meeting, it was agreed that as a next step, I would reach out to some of Tesla’s largest shareholders. Our largest investors have been extremely supportive of Tesla over the years, and understanding whether they had the ability and desire to remain as shareholders in a private Tesla is of critical importance to me. They are the ones who believed in Tesla when no one else did and they are the ones who most believe in our future. I told the board that I would report back after I had these discussions.

Why did I make a public announcement?
The only way I could have meaningful discussions with our largest shareholders was to be completely forthcoming with them about my desire to take the company private. However, it wouldn’t be right to share information about going private with just our largest investors without sharing the same information with all investors at the same time. As a result, it was clear to me that the right thing to do was announce my intentions publicly. To be clear, when I made the public announcement, just as with this blog post and all other discussions I have had on this topic, I am speaking for myself as a potential bidder for Tesla.

Why did I say “funding secured”?
Going back almost two years, the Saudi Arabian sovereign wealth fund has approached me multiple times about taking Tesla private. They first met with me at the beginning of 2017 to express this interest because of the important need to diversify away from oil. They then held several additional meetings with me over the next year to reiterate this interest and to try to move forward with a going private transaction. Obviously, the Saudi sovereign fund has more than enough capital needed to execute on such a transaction.

Recently, after the Saudi fund bought almost 5% of Tesla stock through the public markets, they reached out to ask for another meeting. That meeting took place on July 31st. During the meeting, the Managing Director of the fund expressed regret that I had not moved forward previously on a going private transaction with them, and he strongly expressed his support for funding a going private transaction for Tesla at this time. I understood from him that no other decision makers were needed and that they were eager to proceed.

I left the July 31st meeting with no question that a deal with the Saudi sovereign fund could be closed, and that it was just a matter of getting the process moving. This is why I referred to “funding secured” in the August 7th announcement.

Following the August 7th announcement, I have continued to communicate with the Managing Director of the Saudi fund. He has expressed support for proceeding subject to financial and other due diligence and their internal review process for obtaining approvals. He has also asked for additional details on how the company would be taken private, including any required percentages and any regulatory requirements.

Another critical point to emphasize is that before anyone is asked to decide on going private, full details of the plan will be provided, including the proposed nature and source of the funding to be used. However, it would be premature to do so now. I continue to have discussions with the Saudi fund, and I also am having discussions with a number of other investors, which is something that I always planned to do since I would like for Tesla to continue to have a broad investor base. It is appropriate to complete those discussions before presenting a detailed proposal to an independent board committee.

It is also worth clarifying that most of the capital required for going private would be funded by equity rather than debt, meaning that this would not be like a standard leveraged buyout structure commonly used when companies are taken private. I do not think it would be wise to burden Tesla with significantly increased debt.

Therefore, reports that more than $70B would be needed to take Tesla private dramatically overstate the actual capital raise needed. The $420 buyout price would only be used for Tesla shareholders who do not remain with our company if it is private. My best estimate right now is that approximately two-thirds of shares owned by all current investors would roll over into a private Tesla.

What are the next steps?
As mentioned earlier, I made the announcement last Tuesday because I felt it was the right and fair thing to do so that all investors had the same information at the same time. I will now continue to talk with investors, and I have engaged advisors to investigate a range of potential structures and options. Among other things, this will allow me to obtain a more precise understanding of how many of Tesla’s existing public shareholders would remain shareholders if we became private.

If and when a final proposal is presented, an appropriate evaluation process will be undertaken by a special committee of Tesla’s board, which I understand is already in the process of being set up, together with the legal counsel it has selected. If the board process results in an approved plan, any required regulatory approvals will need to be obtained and the plan will be presented to Tesla shareholders for a vote.

Sheikh Rashid bin Saeed Al Maktoum was responsible for the transformation of Dubai from a small cluster of settlements near the Dubai Creek to a modern port city and commercial hub. His famous line, "My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, his son will drive a Land Rover, but his son will ride a camel", reflected his concern that Dubai's oil, which was discovered in 1966 and which began production in 1969, would run out within a few generations. He therefore worked to develop the economy of Dubai so that it could survive after the end of oil production, and was a driving force behind a number of major infrastructure projects to promote Dubai as a regional hub for trade

Earlier this month, I announced that I was considering taking Tesla private. As part of the process, it was important to understand whether our current investors believed this would be a good strategic move and whether they would want to participate in a private Tesla.

Our investors are extremely important to me. Almost all have stuck with us from the time we went public in 2010 when we had no cars in production and only a vision of what we wanted to be. They believe strongly in our mission to advance sustainable energy and care deeply about our success.

I worked with Silver Lake, Goldman Sachs and Morgan Stanley, who have world-class expertise in these matters, to consider the many factors that would come into play in taking Tesla private, and to process all the incoming interest that we received from investors to fund a go-private transaction. I also spent considerable time listening to current shareholders, large and small, to understand what they think would be in the best long-term interests of Tesla.

Based on all the discussions that have taken place over the last couple of weeks and a thorough consideration of what is best for the company, a few things are clear to me:

• Given the feedback I’ve received, it’s apparent that most of Tesla’s existing shareholders believe we are better off as a public company. Additionally, a number of institutional shareholders have explained that they have internal compliance issues that limit how much they can invest in a private company. There is also no proven path for most retail investors to own shares if we were private. 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.”
• I knew the process of going private would be challenging, but it’s clear that it would be even more time-consuming and distracting than initially anticipated. This is a problem because we absolutely must stay focused on ramping Model 3 and becoming profitable. We will not achieve our mission of advancing sustainable energy unless we are also financially sustainable.
• That said, my belief that there is more than enough funding to take Tesla private was reinforced during this process.

After considering all of these factors, I met with Tesla’s Board of Directors yesterday and let them know that I believe the better path is for Tesla to remain public. The Board indicated that they agree.

Moving forward, we will continue to focus on what matters most: building products that people love and that make a difference to the shared future of life on Earth. We’ve shown that we can make great sustainable energy products, and we now need to show that we can be sustainably profitable. With all the progress we’ve made on Model 3, we’re positioned to do this, and that’s what the team and I are going to be putting all of our efforts toward.

Thank you to all of our investors, customers and employees for the support you’ve given our company. I’m incredibly excited to continue leading Tesla as a public company. It is a privilege.