CNBC reported last week that will the Tesla board planned to meet with financial advisers This particular week to formalize a process to explore Musk’s proposal. The board can be also likely to ask Musk to recuse himself by the decision, people familiar with the discussions said.
The Tesla board had already met “many times” to discuss the possibility of going private, members of the board said last week, however Musk said Monday he felt that will was necessary to inform all of Tesla’s shareholders.
“that will 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,” Musk wrote. “As a result, that will was clear to me that will the right thing to do was announce my intentions publicly.”
As I announced last Tuesday, I’m considering taking Tesla private because I believe that will could be not bad for our shareholders, enable Tesla to operate at its best, along with advance our mission of accelerating the transition to sustainable energy. As I continue to consider This particular, I want to answer some of the questions that will have been asked since last Tuesday.
What has happened so far?
On August 2nd, I notified the Tesla board that will, in my personal capacity, I wanted to take Tesla private at $420 per share. This particular was a 20% premium over the ~$350 then current share cost (which already reflected a ~16% increase inside cost 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 will preferred that will 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 will meeting, I told the board about the funding discussions that will had taken place (more on that will below) along with I explained why This particular could be in Tesla’s long-term interest.
At the end of that will meeting, that will was agreed that will as a next step, I would certainly reach out to some of Tesla’s largest shareholders. Our largest investors have been extremely supportive of Tesla in recent times, along with understanding whether they had the ability along with desire to remain as shareholders in a private Tesla can be of critical importance to me. They are the ones who believed in Tesla when no one else did along with they are the ones who most believe in our future. I told the board that will I would certainly 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, that will 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, that will was clear to me that will the right thing to do was announce my intentions publicly. To be clear, when I made the public announcement, just as with This particular blog post along with all different discussions I have had on This particular 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 particular interest because of the important need to diversify away by oil. They then held several additional meetings with me over the next year to reiterate This particular interest along with to try to move forward having 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 will meeting took place on July 31st. During the meeting, the Managing Director of the fund expressed regret that will I had not moved forward previously on a going private transaction with them, along with he strongly expressed his support for funding a going private transaction for Tesla at This particular time. I understood by him that will no different decision makers were needed along with that will they were eager to proceed.
I left the July 31st meeting with no question that will a deal with the Saudi sovereign fund could be closed, along with that will that will was just a matter of getting the process moving. This particular can be why I referred to “funding secured” inside 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 along with different due diligence along with their internal review process for obtaining approvals. He has also asked for additional details on how the company would certainly be taken private, including any required percentages along with any regulatory requirements.
Another critical point to emphasize can be that will before anyone can be asked to decide on going private, full details of the plan will be provided, including the proposed nature along with source of the funding to be used. However, that will would certainly be premature to do so today. I continue to have discussions with the Saudi fund, along with I also am having discussions with several different investors, which can be something that will I always planned to do since I would certainly like for Tesla to continue to have a broad investor base. that will can be appropriate to complete those discussions before presenting a detailed proposal to an independent board committee.
that will can be also worth clarifying that will most of the capital required for going private would certainly be funded by equity rather than debt, meaning that will This particular would certainly not be like a standard leveraged buyout structure commonly used when companies are taken private. I do not think that will would certainly be wise to burden Tesla with significantly increased debt.
Therefore, reports that will more than $70B would certainly be needed to take Tesla private dramatically overstate the actual capital raise needed. The $420 buyout cost would certainly only be used for Tesla shareholders who do not remain with our company if that will can be private. My best estimate right today can be that will approximately two-thirds of shares owned by all current investors would certainly roll over into a private Tesla.
What are the next steps?
As mentioned earlier, I made the announcement last Tuesday because I felt that will was the right along with fair thing to do in order that will all investors had the same information at the same time. I will today continue to talk with investors, along with I have engaged advisors to investigate a range of potential structures along with options. Among different things, This particular will allow me to obtain a more precise understanding of how many of Tesla’s existing public shareholders would certainly remain shareholders if we became private.
If along with when a final proposal can be presented, an appropriate evaluation process will be undertaken by a special committee of Tesla’s board, which I understand can be already inside process of being set up, together with the legal counsel that will has selected. If the board process results in an approved plan, any required regulatory approvals will need to be obtained along with the plan will be presented to Tesla shareholders for a vote.
—CNBC’s Alex Sherman, Dawn Kopecki along with Robert Ferris contributed to This particular report.