a weekend of conflicting news between Reuters and Bloomberg, with
the former saying the Saudis were not interested in taking Tesla
private, while the latter said there were negotiations between
Tesla and the Saudi Sovereign Wealth Fund, while some investors
sued Tesla for fraud and market manipulation even as the SEC has
been sniffing to find out if Musk's "funding secured" tweet was
true, moments ago Elon Musk published an damage control update on
the Tesla going private transaction.
the report Musk says that "on
August 2nd, I notified the Tesla board that, in my personal
capacity, I wanted to take Tesla private at $420 per share.... 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."
first explains why he made a public announcement on Twitter:
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.
then laid out the recent contact he had with the Saudi fund:
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
the Saudi sovereign fund has more than enough capital needed
to execute on such a transaction."
maybe, but did they guarantee that any of this capital would be
allocated toward an MBO? It appears it was a matter of semantics:
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
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.
here is where the "funding secured" statement came from:
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.
was the funding really secured?
Apparently not, because in the very next paragraph Musk writes
that "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."
other words "funding was secured"... subject
to due diligence, further review and actual deal details, which
would only be formalized after Musk first assured the world that
"funding was secured", meanwhile the only real motive behind the
tweet was to "burn the shorts."
gets more complicated:
31st take-private offer: "I
understood from [Saudi SWF director] that no other decision
makers were needed."
7th version: "He
has expressed support for proceeding subject to... their
internal review process for obtaining approvals."
which was it? Or, summarized:
met the Saudis
have lots of cash
wonders just when the Saudi Wealth Fund, which as the FT recently
reported is having significantly capital issues, will come out
with a statement saying they have no idea where Musk got this
now it is up to the SEC to determine just how "secured" funding
was when it was in fact not secured, and subject to more work and
also hedges by saying 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."
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
has also inadvertently admitted to another potential problem: his
latest open-market stock buys took place while having ongoing
discussions with the Saudis about taking his company private, a
transaction which wasn't even noted in the 10-Q's recent
developments section. Surely the SEC will also inquire about that.
he lays out the next steps:
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.
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.
now let the debate resume about whether what Musk did was legal,
whether the Saudis are in fact prepared to take the company
private, and whether the funding was indeed "secured."