Should Elon Musk Have Taken Tesla Private?

Things were looking good for Tesla (TSLA) in August. The company reported better-than-expected earnings for the second quarter and investors were optimistic on what the company could do in the second half of 2018.

After all, Tesla burned less than expected, tightened spending and had Model 3 production improving by significant measures. Management stuck to its outlook of profitable and free-cash flow positive quarters in Q3 and Q4.

The results ignited the stock, pushed against $ 360 and threatened to erupt to new all-time highs. The shorts were in trouble and the CEO Elon Musk probably thought he was about to throw gasoline on the fire. Instead, he threw him cold water on it.

He tweeted that he intended to take Tesla private at $ 420 a share and he had "funding secured." Even more impactful, he feels the tweet during the day trading, confusing nearly everyone who follows the stock. Why is not the stock halted? Did someone hack Musk's Twitter (TWTR) account? If not, is he for real?

All these questions and more popped up. Enthusiasts cheered the move. Long-time stock market veterans – like Stephen "Sarge" Guilfoyle – were surprised that Musk would be so arrogantly thumb up at the financial markets. "Yes, I take offense when you make a mockery of your financial marketplace," he reasoned. Some people cleaned up the stock as it cracked.

As a result of his actions, Musk was investigated by the SEC, fined $ 20 million and should be relinquished as executive chairman for the next three years. But should he have just found a way to make it work? Maybe his funding was not secured after all. Maybe it was too difficult to keep long-time investors who believe in Tesla on board in a go-private deal.

Regardless, some say he should have gone private. Specifically, Tim Draper, a Silicon Valley venture capitalist and early investor in Tesla and Musk's other company SpaceX, says Musk would have saved himself some trouble doing it.

It was a "human" mistake, Draper said at the Web Summit conference in Lisbon Tuesday. That being said, he also reasoned that Musk "probably should have just taken the whole thing private."

At this point, I'm not sure that going private would take Musk and Tesla out of the spotlight. Much like Uber, this company is hard to lay low for too long. But by being a private company, Tesla would like to have a public relations relationship: Quarterly reports, SEC filings, exchange requirements and many other obstacles would be eliminated.

But so too would Tesla's access to public markets. Would that matter? Maybe not anymore. Tesla's operations is one of the most important examples of this phenomenon. That includes vehicle manufacturing, R & D and expansion efforts.

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Whether Tesla's cash flows will remain as they are in the third quarter. But if Tesla does not need to rely on capital raises via stock sales, perhaps it does not need the public markets anymore. Bay Area looking for a home.

Musk would have a private company, but for the time being, it does not look like it will be the case. We'll still be watching TSLA for quite some time it seems.

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