Elon Musk's dream to take Tesla private lasted only 17 days, but that short spell can change the car manufacturer forever.
Markets were stunned by a Twitter post on August 7, in which Mr. Musk said he considered acquiring the company from the public markets and secured the financing & # 39; had.
The share price of the company increased by as much as 10%, but fell back later, while questions arose about how and if such a deal could be achieved. The US Securities and Exchange Commission started an investigation, according to people familiar with the case, and the board of directors of Tesla has since maintained a high-powered New York law firm to advise them on possible failures of laws and regulations, according to two people who have been informed about the matter.
Then, late on Friday, Minister Musk called the whole thing off. However, the legal fame of Tesla, its directors and Mr Musk remains an open question because they are struggling with SEC questions and lawsuits against shareholders.
The retention of Paul, Weiss, Rifkind, Wharton & Garrison is an indication that the sign takes the SEC's attention seriously and shows that the Pandora's problem box opened by Mr Musk's Twitter post can not be easily closed.
"The board is still very concerned about being hit by a wave of lawsuits from investors and the ongoing SEC investigation," said one person who had a briefing on the matter.
It is unclear whether Mr. Musk takes on private lawyers to deal with any legal challenges.
The board is also speeding up its search for a new manager who will work closely with Mr. Musk, according to a person close to the directors.
Shareholders have conceived the idea of installing a chief operating officer who can bring a different type of management discipline to business operations, as Mr. Musk at SpaceX has done by naming Gwynne Shotwell as COO.
"Hiring a large COO would be the biggest risk for the shorts [people betting against the company]"Said a shareholder." That would bring the share price to a different level. "
Tesla said in a statement: "Although we are always looking for talented executives at Tesla, there is no active [chief operating officer] Search."
Tesla and Mr Musk look at class-action suits from investors who claim that his original Twitter message that the financing was "secured" was misleading and caused damage to people who bought shares at high prices in the immediate aftermath.
"This confirms the theory of the complaint, namely that the funding was not secure at the time that Musk issued his tweet," said Ashley Keller, a lawyer at Keller Lenkner who has filed one of several class-action lawsuits.
Even in his Friday night blog in which he withdraws his proposal, Mr Musk has not withdrawn from his conviction that the company could become private. "My conviction that there is more than enough financial means to take Tesla privately is reinforced during this process," he wrote.
Keller said, "He can say anything he wants the process to confirm he could get the funding, but you can imagine that there are many people [who] are skeptical about this. "
The two and a half weeks between Mr Musk's announcement that he was considering taking Tesla privately – at $ 420 per share – and his withdrawal brought to light a large number of problems affecting investors, even if many of them decision to continue to welcome the public.
The episode threatens to weaken Mr. Musk's relationship with a few small shareholders, which he regards as a core component of Tesla's support.
On Saturday, he wrote on Twitter that the "showstopper" for the take-private deal was the inability of retail investors to participate due to the listing rules. He said that he had considered using a vehicle for special purposes, but that it was impossible "without creating [an] exotic trust structure that would prob[ably] not be accepted by supervisors ".
Mr Keller said that many of the people affected by Mr Musk's original announcement were small investors. "It was a lot of little mum and pop types who bought 50, 100, a few hundred shares, and the people he hurt with his tweet are not just big, faceless settings. & # 39;
The episode also asked questions about the ability of the board to keep the boss in check.
An interview with the New York Times on August 16 brought even more alarm: Mr. Musk revealed that he sometimes took sleeping pills and talked about the emotional toll of working 120-hour working weeks at the car manufacturer.
Six directors of Tesla said Friday in a statement that they supported Mr. Musk and his leadership. "We fully support Elon while continuing to lead the company," they said.
However, a person near the board said that some directors were very concerned about the possible consequences and consequences for the company of Mr Musk's Twitter messages.
Musk has continued to place on the site at all hours of day and night. Even when Tesla published a blog post on Friday evening announcing the decision to remain public, Musk wrote about SpaceX.
The handling of the incident has dampened the already low perception of Tesla's management in the eyes of the investment community, a group that desperately needs to win back the company if it wants to be able to attract cheap capital again in the future.
"One lower on the credibility scale for him and the board," said an analyst.
Carl Tobias, a professor at the University of Richmond, said: "Under corporate governance rules, you have fiduciary responsibility to ensure that you do everything possible to make the business profitable and trustworthy. irresponsible.
"You do not want to deal with lawsuits all the time, you want to do your business, and then there's public relations." Perceptions are important. "