Elon Musk, the second-richest man in the world according to Forbes, seeks to take Tesla, Inc. private. According to many sources, Tesla’s CEO declared in 2018 on his Twitter account that he secured the necessary financial backing to take the electric car company private. This statement, however, happened to be inaccurate as he faced a couple of lawsuits since that tweet. But the question here is: why? Why does Elon Musk want to take Tesla private? Elon Musk is the owner of three large corporations: Tesla, Inc., Space Exploration Technologies Corp., and Twitter, Inc. Among these three corporations, two of them are private. Only Tesla is listed as a publicly-traded company on the New York Stock Exchange. We can clearly see that the South-African born tech tycoon likes to keep his companies private. And why is that?
Twitter used to be a publicly-traded company for a long time. Why did Musk take it private then? Simply for political reasons. Politics played, indeed, a huge role in the company’s management. Twitter used to censor any person who would make statements that weren’t aligned with mainstream culture: a culture that promotes progressive ideas such as diversity and inclusion, and egalitarian principles. Left-wing celebrities were hailed and people with right-wing ideas were demonized and banned from the platform. President Donald Trump is, perhaps, the best example to illustrate this soft totalitarianism that Twitter was imposing on humanity. For Musk, Twitter’s management style became a serious threat to free speech, and since the mainstream culture is left-leaning, most investors in the public would buy Twitter’s shares to continue promoting progressive ideas and upholding this soft totalitarianism. Elon Musk paid $44 billion to acquire Twitter and took it off the stock market. He reinstated President Donald Trump and many other prominent right-leaning individuals on the platform. Today, only private investors with deep pockets can invest in Twitter.
Musk wants to take Tesla private for different reasons. Politics has nothing to do with this. The reasons are financial, and management-based. It is true that being a public company has many advantages. The greatest advantage of being a public company is the ability to raise capital. This provides an endless cash supply if the market approves the company. Beyond this advantage, there is the flexibility to diversify shareholders and the opportunity to cash-out for early investors. But being a public company also has many downsides. The two most important downsides of being a public company are the fact that the company has to disclose its financial statements to the public and the fact that the company is exposed to short-selling. Today, Gautam Adani is experiencing the downside of being a public company as his wealth is plummeting at an unprecedented pace since Hindenburg Research, the New York-based investment firm that specializes in short-selling, released its report on the practices of Adani Enterprises, Ltd.
Musk knows that there are many advantages to remaining a private company. And this is why he never took SpaceX public and took Twitter off the stock exchange. The first and foremost advantage of being a private corporation is to retain control over the business and the freedom to select its own investors. A private company is not legally obligated to disclose its financial statements to the public. Only private investors who are interested in becoming shareholders in the company can have access to these financial statements. This then protects the company from any exposure to short-sellers. This is the main reason why Kock Industries, Inc. never went public. It is the largest privately-held corporation in America. If Musk was able to take Twitter private, it is a matter of time before he also takes Tesla private.