Tesla might go private, Musk tweets, at $420

Discussion in 'Tesla' started by Domenick, Aug 7, 2018.

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  1. Domenick

    Domenick Administrator Staff Member

    Elon Musk tweeted today he might take the company private at $420 a share and that funding is already lined up. I thinnk he's serious. (there has been some doubt expressed because "420," among other reasons.

    Anyway, the stock sure has made a big jump as people gamble that they'll be able to sell relatively soon at $420.

    Discuss.
    Musk 420 tweet.jpg
     

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  3. bwilson4web

    bwilson4web Well-Known Member Subscriber

    ROFLMAO!!!

    He is sticking it to the shorters and skeptics big-time!

    Bob Wilson
     
  4. Domenick

    Domenick Administrator Staff Member

  5. Domenick

    Domenick Administrator Staff Member

    Some clarification from Musk.

    Elon tweet.jpg
     
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  6. Domenick

    Domenick Administrator Staff Member

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  8. bwilson4web

    bwilson4web Well-Known Member Subscriber

    So did I call it?

    Bob Wilson
     
  9. Domenick

    Domenick Administrator Staff Member

    Well, this is about a lot more than just sticking it to the shorts. It's really to allow for business decisions that focus on the long-term goals of the company instead of being quarterly driven.

    Also, this won't be a permanent state. As noted in the letter, this privatization plan is just for this high-growth period as it becomes a more mature company. He says he hopes to go public again eventually.
     
  10. bwilson4web

    bwilson4web Well-Known Member Subscriber

    As a business decision, he proposes to 'hedged' himself. In effect, get the debt and take over himself. Meanwhile, the hedge funders (may they rot in Hades) are seeing Tesla move out of reach even for their bankers.

    Bob Wilson
     
  11. 101101

    101101 Well-Known Member

    Rather see him have the employees buy it than take it back public. Might be able to form a tighter version of a co-op if he does it right, one that wouldn't need a union as opposed to Mondragon ending up with one.
     
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  13. Pushmi-Pullyu

    Pushmi-Pullyu Well-Known Member

    I'm not sure why he started another thread to talk about this subject, but elsewhere, Bob Wilson posted this clarification from Musk:

    Source: https://www.courthousenews.com/wp-content/uploads/2018/08/4865.pdf

    . . .
    At 3:07pm, Defendant Musk Tweeted: “Def no forced sales. Hope all shareholders remain. Will be way smoother & less disruptive as a private company. Ends negative propaganda from shorts.” This was in response to a Tweet from @MindFieldMusic stating that “At 1st I was upset bc I thought this would be a forced buyout. But if average folk like myself are allowed to reside with the garden walls along with you, then . . . Yes please.”
    . . .
     
  14. bwilson4web

    bwilson4web Well-Known Member Subscriber

    Consider it bait to attract someone with legal training to offer insights without having to wade through . . . lay reports. <grins>

    Bob Wilson
     
  15. Domenick

    Domenick Administrator Staff Member

    Update from Musk this morning. TL;DR, it's the Saudi sovereign wealth fund that may invest in this transition.

    Update on Taking Tesla Private
    Elon Musk – August 13, 2018

    As I announced last Tuesday, I’m considering taking Tesla private because I believe it could be good for our shareholders, enable Tesla to operate at its best, and advance our mission of accelerating the transition to sustainable energy. As I continue to consider this, I want to answer some of the questions that have been asked since last Tuesday.

    What has happened so far?

    On August 2nd, I notified the Tesla board that, in my personal capacity, I wanted to take Tesla private at $420 per share. This was a 20% premium over the ~$350 then current share price (which already reflected a ~16% increase in the price since just prior to announcing Q2 earnings on August 1st). 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.

    After an initial meeting of the board’s outside directors to discuss my proposal (I did not participate, nor did Kimbal), a full board meeting was held. During that meeting, I told the board about the funding discussions that had taken place (more on that below) and I explained why this could be in Tesla’s long-term interest.

    At the end of that meeting, it was agreed that as a next step, I would reach out to some of Tesla’s largest shareholders. Our largest investors have been extremely supportive of Tesla over the years, and understanding whether they had the ability and desire to remain as shareholders in a private Tesla is of critical importance to me. They are the ones who believed in Tesla when no one else did and they are the ones who most believe in our future. I told the board that I would report back after I had these discussions.

    Why did I make a public announcement?

    The 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.

    Why did I say “funding secured”?

    Going 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 transaction. Obviously, the Saudi sovereign fund has more than enough capital needed to execute on such a transaction.

    Recently, 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 them, and 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.

    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.

    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.

    Another critical point to emphasize is that before anyone is asked to decide on going private, full details of the plan will be provided, including the proposed nature and source of the funding to be used. However, it would be premature to do so now. 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.

    It is also worth clarifying 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.

    Therefore, 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 Tesla.

    What are the next steps?

    As 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.

    If 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.
     
  16. Kosh

    Kosh New Member

    I would much rather it be somebody like Apple or Google that provided the funding. Seems like a good fit and we wouldn't have to worry about hidden agendas.
     
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  17. HVACman

    HVACman New Member

    This letter will do nothing to either calm the nerves of stockholders or the wrath of the SEC. If anything, it adds to their ammo. Net is that the stock is down 13 points to 350 since the letter was issued.

    https://money.cnn.com/quote/chart/chart.html?symb=TSLA

    IIRC, there is an established procedure for fairly addressing potential public-to-private offers and ensuring that the conversation between management and the potential financier remains private and won't affect the public stock price until the deal really is finalized and approved by the board. A formal paper is then filed with the SEC and it can then be presented to ALL the shareholders for a formal vote, with a detailed plan of how current shareholders will either be able to convert their public stock holding to private, or to sell-out and be compensated at the new established stock par value. Public stock trading is frequently suspended until that is sorted out and the proposal either accepted or rejected by the stockholders. .

    I'm afraid Elon's pre-mature tweets, emails, letters, etc. will doom this privatization process because of gross SEC violations, thereby snatching defeat from the jaws of victory.
     
  18. Domenick

    Domenick Administrator Staff Member

    I think once the initial deal is done, the Saudi government couldn't really do anything to negatively affect the company. I mean, they could, but it woud be against their financial interests.

    Of course, if you want to get super conspiratorial, you could see this as a way to have the company dependent on it involvement and try to sink the whole thing, but one would think there's a way to do that without spending billions of $$$..
     
  19. Pushmi-Pullyu

    Pushmi-Pullyu Well-Known Member

    I guess the most important question here, for a non-investor like me who's a fan of Tesla, is whether or not the Saudis would wind up with a controlling interest in Tesla. I've seen it claimed that Elon, his family, and his inner circle of friends control the majority of Tesla stock. If that continues to be the case, then I'm not worried. But I am worried if the Saudis take over voting control of Tesla.

    Not so much that I'm worried Big Oil will buy out Tesla only to bury it. The Saudis are wisely diversifying their income from oil, because they know that won't last forever. Investing in Tesla certainly seems like a wise move to hedge against the day when oil prices collapse, and if the Saudis kill off Tesla, that would kill off that strategy. I don't think that is their aim.

    But still, altho I approve of what seems to be the Saudis' long-term goal in investing it Tesla, that doesn't necessarily prevent short-term goals from being a motive for them to sabotage Tesla's business or its sales. Or not even necessarily sabotage; just move Tesla in a direction contrary to its mission statements.

     

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