Tesla shares lower after company abandons plans to go private

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Tesla makes U-turn on plans to go private

Kadina Group President Gary B. Smith on the future of Tesla.

Tesla shares fell on Monday after the company abandoned plans to go private.

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TSLATESLA INC.252.38-1.12-0.44%

The electric automaker will remain a public company, according to chief executive Elon Musk, following investors’ convincing.

In a written statement late Friday, Musk said that he made the decision to keep Tesla public based on feedback from shareholders, including institutional investors who said they have internal rules limiting how much they can sink into a private company. According to the statement, the board agreed.

"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," Musk wrote in the statement.

Musk added that he worked with investment firms Goldman Sachs, Morgan Stanley and Silver Lake to consider all the options, and he talked to investors, noting that his belief that there was more than enough funding to take the company private was reinforced during the process.

Musk tweeted on Aug. 7 that he was considering taking Tesla private, adding that funding had been secured for the deal. The tweet said Tesla would offer $420 per share, 23 percent above the Aug. 6 closing price. If all the shares were bought, the deal would be worth $72 billion.

Later, Musk said that he expected only one-third of stakeholders to agree to the buyout. Shares shot up 11 percent the day of the tweet, but they have since pulled back.

The tweet brought an inquiry from the U.S. Securities and Exchange Commission, which is reportedly looking into whether he was trying to manipulate the share price. Short-sellers, who bet against a company's success, complained that Musk was trying to hurt them. At least two lawsuits have been filed against Tesla on behalf of shareholders alleging Musk broke the law with his tweet.

In a statement Friday, six members of Tesla's board wrote that the board has dissolved a three-member committee set up to study any possible go-private transaction.

The Associated Press contributed to this report.