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Musk gives up $72 billion plan to take Tesla private

International Business
Sun, 26 Aug 2018

Washington: Tesla chief executive Elon Musk said yesterday he would heed shareholder concerns and no longer pursue a $72 billion deal to take the luxury electric car maker private, abandoning an idea that stunned investors and drew regulatory scrutiny.

The decision to leave Tesla as a publicly listed company raises new questions about its future. Tesla shares have been trading well below their August 7 levels, when Musk announced on Twitter that he was considering taking Tesla private for $420 per share, as investors wondered what this meant for Musk’s ability to steer the company to profitability.

Musk and Tesla also face a series of investor lawsuits and a US Securities and Exchange Commission investigation into the factual accuracy of Musk’s tweet that funding for the deal was “secured.”

Musk said that his belief that there is more than enough funding to take the company private was reinforced during the process, but said he abandoned the bid based on feedback from shareholders and because the effort was proving to be more time-consuming and distracting than anticipated.

“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’,” Musk wrote in a blog post.

Musk, who owns about a fifth of Tesla, said previously that he envisioned taking the company private without the standard method of a leveraged buyout, in which all the other shareholders would cash out and the deal would be funded primarily with new debt.

Musk estimated that two-thirds of Tesla shareholders would have chosen an option of “rolling” their stakes into a private company, rather than cashing out. That would significantly reduce the amount of money needed for the deal and avoid further burdening Tesla, which has a debt pile of $11bn and negative cash flow.

However, Musk said that a number of institutional shareholders explained that they have internal compliance issues that limit how much they can invest in a private company. He also said there was no proven path for most retail investors to own shares were Tesla to go private.

That assessment contrasts sharply with an August 7 tweet, when Musk said: “Investor support is confirmed,” and that the “only reason why this is not certain is that it is contingent on a shareholder vote.”

T Rowe Price Group, Fidelity Investments and Scotland’s Baillie Gifford, which are top Tesla shareholders, declined to comment.

Musk also said previously that Saudi Arabia’s PIF, which invested in Tesla earlier this year with a stake of just under five per cent, could help him fund the cash portion of the deal, though sources close to the sovereign wealth fund had

played down that prospect. PIF is in talks to invest more than $1bn in aspiring Tesla rival Lucid Motors.

Musk said he worked with private equity firm Silver Lake, which previously helped bankroll computer maker Dell Technologies’ take-private transaction, as well as investment banks Goldman Sachs Group and Morgan Stanley, on exploring how he could take Tesla private.

Six members of Tesla’s board of directors said in a separate statement that they were informed on Thursday by Musk that he was abandoning his take-private bid. The board then disbanded a special committee of three directors it had set up to evaluate any offer that Musk submitted. “We fully support Elon as he continues to lead the company moving forward,” the board said.

However, some corporate governance experts said Musk’s handling of the take-private bid could pressure the board to assert its independence and consider ways to rein him in by, for example, bringing in a chief operating officer.

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