A detailed look at the ill-fated plan to take Tesla private.
Aug. 7
Elon’s To-Do List
◻ Make lots more Model 3 cars.
◻ Get more cash (to build new models, new plants).
◻ Punish the short sellers (aka “the haters”).
Hmmm… How to escape
public scrutiny while
facing those challenges?
PERFECT SOLUTION #1
Take the company private!
Consult with
others
Do what
I want
Get advice
from the
Tesla board.
Query large
shareholders.
Line up
investment
bankers.
Sounds boring
Use Twitter!
He wows the markets with a tweet naming
a buyout price of $420 a share, about a 20
percent premium, valuing the company at about
$72 billion. And he assures the skeptics by
blithely mentioning “financing secured.”
AN ABORTED TAKEOFF
Stock jumps, but not to anywhere
near the buyout price; then falls
Tweet!
$380
340
300
8/1/18
8/28/18
Pivot time!
Scramble to address calls for deal details and criticism of the
disclosure-by-tweet process.
Get a statement of
support from Tesla’s
directors (some of whom
were blindsided, too).
Hire some
investment bankers.
Hunt for cash
Goldman Sachs has long
been Musk’s banker
of choice, so naming it—
before a contract is
signed—is a no-brainer.
Add Morgan Stanley
and Silver Lake.
Get Riyadh on the
phone! Saudi Arabia’s
sovereign wealth
fund had approached
Musk in 2017.
Easy enough, since the
board includes Musk’s
brother, plus several
members with business
ties to the mogul.
The new math
PERFECT SOLUTION #2
Since it would likely be too costly to buy
up all shares in a conventional leveraged
buyout, Musk proposes a hybrid entity
wherein holders of roughly two-thirds of
Tesla’s shares roll their equity into the
privatized company—lowering the funds
needed to as little as $24 billion.
Damn those pesky details
Discussions with
Tesla’s big institutional
shareholders reveal
some have limits on
how much they can
invest in a privately
held company.
Wall Streeters say
some deep-pocketed
investors may expect
to have a say in
Tesla’s management
in return for cash—
eliminating some of
the flexibility Musk
hoped to gain
by going private.
SEC rules to protect
unsophisticated
investors likely mean
that a post-buyout Tesla
wouldn’t be allowed
to accept investments
from many of its small
shareholders.
17 days later …
PERFECT SOLUTION #3
Don’t take the company private!
Musk concedes the
deal would be a
lengthier distraction
“than initially
anticipated.” Shares
tumble—they’re
now 9 percent lower
than before
Musk’s tweet.
Aug. 24
Elon’s Expanded To-Do List
◻ Make lots more Model 3 cars.
◻ Get more cash (to build new models, new plants).
◻ Punish the short sellers (aka “the haters”).
◻ Avoid SEC censure over botched buyout announcement.
◻ Deal with shareholder suits.
◻ Ditch the Twitter account (or not!).