Elon Musk defends his ‘funding secured’ tweet to take Tesla private

Devin Lawrence
August 13, 2018

He also said most of the capital needed to go 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", adding that he didn't want to saddle the company with massive additional debt.

Musk's surprise comments last week sparked speculation he would need to borrow massive amounts to take Tesla private, a move that could allow the company to operate without requirements for financial reports and other pressures of a publicly traded firm. Musk and SoftBank Group's Masayoshi Son held talks a year ago that touched on taking Tesla private, two people with knowledge of the discussions have said.

The SEC has asked Tesla if Musk had facts to back up his claim on Twitter that funding is "secured", people familiar with the regulator's inquiry told the Wall Street Journal last week.

The lawsuits were filed three days after Musk stunned investors by announcing on Twitter that he might take Tesla private in a record $72 billion transaction that valued the company at $420 per share, and that "funding" had been "secured".

Saudi Arabia's Public Investment Fund (PIF) is known for its technology investments, including the $45 billion it has spent in SoftBank Group Corp's (9984.T) Vision Fund.

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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. While the entrepreneur owns 20 per cent of Tesla, more than US$60 billion would be needed to buy the business from public shareholders.

The PIF and Tesla didn't respond to requests for comment. They are the ones who believed in Tesla when no one else did and they are the ones who most believe in our future.

According to estimates from Jeffrey Nassof, a director at Freeman Consulting Services, banks advising Tesla could make $90 million to $120 million in fees, while advisers to Musk could take home $30 million to $50 million. "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", Musk wrote. "So the potential investor must be patient and strategic-looking". The discussions failed to progress due to disagreements over ownership.

For Saudi Arabia, an investment in Tesla could act as a hedge against the long-term decline of oil. As a result, PIF itself chose to buy around $2 billion in Tesla shares, reportedly with the help of an investment bank. In a tweet on Sunday, the nation's Energy Department said Saudi Arabia now is working to develop a city to support the supply of raw materials and parts for the automobile industry.

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