Under fire from certain quarters for his tweeted announcement last week, about taking Tesla private, Elon Musk has responded with a rather lengthy blog-post entitled “Update on Taking Tesla Private”, in which he has tried to justify, at length, his position on the entire matter.
Before we discuss what he said in that August 13 update, let’s first do a quick recap of the events leading up to it.
Last Tuesday (August 7), the Tesla and Space X CEO announced his intention to take Tesla private at $420, tweeting confirmation that the requisite funding had been “secured.”
“Am considering taking Tesla private at $420. Funding secured,” said the tweeted message.
Am considering taking Tesla private at $420. Funding secured.
— Elon Musk (@elonmusk) August 7, 2018
Explaining the “rationale” behind the announcement in an email addressed to Tesla employees, Musk wrote that the intended move, though not finalized, was “all about creating the environment for Tesla to operate best.”
He went on to justify his decision by detailing various financial aspects of taking the Palo Alto-based company private; how it would benefit the shareholders; what it would mean for Tesla employees; how it would augment performance; and so forth.
“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,” he wrote.
“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,” he concluded.
Apparently, the tweeted announcement didn’t go down well with the Securities and Exchange Commission (SEC) and reports suggest that the Federal body has initiated an inquiry, if not an investigation, about the legality of the announcement.
If the Commission’s findings reveal that Musk’s tweeted announcement was indeed in violation of any law/s pertaining to public limited companies, it may attract fines that could well go into hundreds of millions of dollars, or criminal charges, or, perhaps, both.
Not only did the tweet rub the SEC up the wrong way, it also attracted several lawsuits from disgruntled investors who feel that the announcement was made with mala fide intent, one of which was to manipulate share prices.
While requests for comments have so far gone unanswered by Tesla, SEC has declined to comment on the issue.
So, with our memories refreshed, we can now understand why Musk felt the need to give a detailed “Update on Taking Tesla Private,” wherein he explains the chain of events leading up to the announcement; why he said what he did; and what to expect going forward.
Musk is convinced that taking Tesla private is the way to go, not only in the interest of the company’s shareholders but also to enhance operational capabilities and advance the company’s “mission of accelerating the transition to sustainable energy.”
Defending his decision to go public about taking Tesla private, the charismatic CEO wants us to believe that it was the only way he could have “meaningful discussions” with the company’s “largest shareholders.”
However, not sharing the same information with the rest of the shareholders would have been kind of unethical; hence his decision to shout it out from the rooftop.
He then goes on to say that the announcement was made “as a potential bidder for Tesla” rather than anything else.
“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.”
Looking to diversify away from oil, the Saudi Arabian sovereign wealth fund, known in the Kingdom as the Public Investment Fund, or PIF, has been in talks with the Tesla CEO about their interest in taking the company private, writes Musk in defense of his “funding secured” comment.
“Going back almost two years, the Saudi Arabian sovereign wealth fund has approached me multiple times about taking Tesla private,” he says in the blog-post
“They first met with me at the beginning of 2017 to express this interest because of the important need to diversify away from oil,” he goes on.
“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,” adding that the Saudi PIF “has more than enough capital needed to execute on such a transaction.”
Having recently bought almost 5 percent of Tesla stock through the public markets, the Saudis wanted another meeting with the CEO, which Musk says took place on July 31.
“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,” Musk writes.
Musk’s take from the meeting was that the Saudis were “eager to proceed” and that the Managing Director was the final deciding authority, leaving the meeting convinced that the deal was as good as sealed.
So, what he is basically saying is that the “funding secured” tweet was no pie in the sky.
“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.”
Talks with the Managing Director is still ongoing, he says, adding that the PIF boss “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.”
Musk pledges complete transparency in so far as the “proposed nature and source of the funding to be used” are concerned, “before anyone is asked to decide on going private.”
“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.”