Wolf Richter wolfstreet.com, www.amazon.com/author/wolfrichter
Turns out, “Funding secured” was a lie, conceived in order to manipulate up the share price.
Tesla CEO Elon Musk has superseded the infamous August 8 tweet — “Am considering taking Tesla private at $420. Funding secured” — which had caused market capitalization to spike by about $6 billion, with a blog post late Friday in which he says that funding was never secured, but that instead it was his “belief” there was “more than enough funding,” and that the buyout isn’t going to happen at all.
We’ll get to some of the rigmarole in a moment, but deep down in his blog post, Musk says this:
After considering all of these factors, I met with Tesla’s Board of Directors yesterday and let them know that I believe the better path is for Tesla to remain public. The Board indicated that they agree.
So the mind-deal is off.
Here’s what he says about the advisors he hired after the “funding secured” tweet, and not before:
I worked with Silver Lake, Goldman Sachs and Morgan Stanley, who have world-class expertise in these matters, to consider the many factors that would come into play in taking Tesla private, and to process all the incoming interest that we received from investors to fund a go-private transaction.
And then there are the current shareholders to consider:
I also spent considerable time listening to current shareholders, large and small, to understand what they think would be in the best long-term interests of Tesla.
He did this after all hell had broken loose following his tweet, including a market reaction that indicated that there was a zero percent chance the buyout would happen at $420 a share, given that shares were trading as much as $120 below the buyout price.
And so, “based on all the discussions that have taken place over the last couple of weeks,” there are now – late Friday, August 24, not August 8 when he was tweeting-while-driving — “a few things” that are finally “clear” to him:
Given the feedback I’ve received, it’s apparent that most of Tesla’s existing shareholders believe we are better off as a public company.
Additionally, a number of institutional shareholders have explained that they have internal compliance issues that limit how much they can invest in a private company.
There is also no proven path for most retail investors to own shares if we were private.
Although the majority of shareholders I spoke to said they would remain with Tesla if we went private, the sentiment, in a nutshell, was “please don’t do this.”
And the whole thing turned into a can of worms, or rather a can of Model 3’s:
I knew the process of going private would be challenging, but it’s clear that it would be even more time-consuming and distracting than initially anticipated. This is a problem because we absolutely must stay focused on ramping Model 3 and becoming profitable. We will not achieve our mission of advancing sustainable energy unless we are also financially sustainable.
After considering all of these factors, I met with Tesla’s Board of Directors yesterday and let them know that I believe the better path is for Tesla to remain public. The Board indicated that they agree.
So this was decided on Thursday. Then Friday night, he discloses what everyone had known all along: No deal.
And that concludes one of the craziest chapters in automotive history that had commenced with tweeting-while-driving, which may be illegal in California. Well, it’s not quite over. There are now lawsuits contend with and the SEC is investigating his claim of “Secured funding” and other things, so this chapter will still drag on in its sordid manner.
Musk isn’t going to get fired over this, six members of the Board said in their own statement Friday night: “we fully support Elon as he continues to lead the company moving forward.”
But Musk was right. Tesla won’t be around unless its business becomes, as he says, “sustainable,” which it is not at the moment, given the gigantic losses, massive cash drain, and the Model 3 manufacturing chaos that still, or more than ever, afflicts the company.