Tesla board forms committee to consider going private

Mae Love
August 14, 2018

Tesla founder Elon Musk has confirmed that he is closely working with Goldman Sachs and private-equity firm Silver Lake to take the electric carmaker private - a deal that would need almost $70 billion in funding.

Three people familiar with the Saudi fund disputed Musk's claims to the New York Times, saying the fund hasn't made any of the moves that would be necessary for such a big deal including preparing a term sheet or tapping financial advisors. It also has hired an independent legal counsel and will engage a financial adviser.

On August 7, the Tesla founder and CEO announced he was considering taking the company private at $420 per share.

Shares in Tesla inched down 0.2 percent in early trading and have now fallen more than 8 percent from highs hit following Musk's tweet last week. Musk wrote that he tweeted the plan August 7 after "it was clear to me that the right thing to do was announce my intentions publicly".

File photo of Elon Musk.

Since going public on Twitter, Musk said he has "continued to communicate with the managing director of the Saudi fund", and that "he has expressed support for proceeding subject to financial and other due diligence and their internal review process for obtaining approvals".

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PIF officials have said in the past that decisions at the sovereign wealth fund are made with care, emphasising corporate governance.

Securities lawyers said US law requires executives and companies to have a "reasonable basis" on which to make statements, meaning the fact Musk said he believed he had secured a verbal agreement for the funding after the July 31 meeting could put him on a firmer footing with the SEC.

"'Funding secured' wasn't exactly funding secured", said Peter Henning, a law professor at Wayne State University in Detroit, a former SEC lawyer. While this values the business at more than $70bn, Mr Musk has said he does not need to raise this amount of financing as he only intends to make the offer to those who did not want to remain investors if the company did go private.

He added that most capital for the deal would come from equity and it would not be "wise" to burden the company with added debt. What's more, a deal would likely prompt a review but the Committee on Foreign Investments in the USA, noted the paper.

That's led to at least two class-action lawsuits alleging securities violations.

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