Within Elon Musk & # 39; s turnaround when taking Tesla private



For his part, Musk has come under new control as his impulsivity has played in real time in the stock market, with billions of dollars at stake.

And even with the decision to stay patient, Musk and the company could remain in the sights of the Securities and Exchange Commission on the circumstances of the original announcement.

"Investors at Tesla have to realize that they have a panicked, capricious and potentially self-destructive CEO at the helm," said Jeffrey Sonnenfeld, a professor at the Yale School of Management. "No CEO is ever so confused and confusing."

Musk had for years romanticized the idea that Tesla would go private. In doing so, he has bent publicly, freeing him from the short-term pressure of the public markets, freeing him from the distraction of a volatile stock price and, more recently, from the short sellers who bet that Tesla would fail. Musk instead believed that he could concentrate on Tesla's work of popularizing electric vehicles and reducing dependence on the world of fossil fuels.

But from the moment his nine-word Twitter posting announced his thoughts on August 7 and said he had "secured funding," other considerations came into play.

In his note that Tesla would remain public, Musk mentioned four important factors that had changed his mind: existing shareholders believe that Tesla is better off as a limited company; not all existing investors could own shares of a private company; it was not clear how individual investors would participate in a deal; and the process could distract the company from the production of its first mass market supply, the Model 3, which is crucial for its financial health.

Through the faith of people familiar with Musk's thinking, the deepening of ties with new private investors presented its own challenges. By taking money from the sovereign wealth fund of Saudi Arabia, Musk said he believed it was certain that Tesla would work with a country whose base was fossil fuels, and that someone often criticized human rights grounds.

That cognitive dissonance, a company with an electric car that is supported by large oil, was pointed out several times to Musk, these people said.

At the same time it became clear that not all large institutional shareholders of Tesla could have participated in a buy-out. Many large investors hold Tesla shares in funds that can only own listed shares.

"In general, some of our customers will find it very difficult to follow," said James Anderson, a partner at Baillie Gifford, Tesla's largest shareholder after Musk, in an interview before Musk signed a deal. "We had this conversation with Mr. Musk himself, he understands that there is a problem here."

The same was probably true for other institutional investors in Tesla, including T. Rowe Price, BlackRock and Fidelity. And Musk heard from many individual investors who wanted Tesla to remain public. On Thursday, a small Tesla investor issued a public letter in which Musk was begged to keep Tesla public.

These funds were remarkable because many regulatory investors can not invest in private companies for regulatory reasons.

On Thursday morning, Elon Musk and the board of Tesla met for a meeting at the factory floor of the company's plant in Fremont, California, people with knowledge of the events said. They were accompanied by representatives of the investment bank Goldman Sachs and the venture capital company Silver Lake, who advised on a deal.

After a representative from Silver Lake had made a presentation expressing their confidence in their ability to manage the process of private Tesla, a transaction that could potentially require $ 24 billion left the Wall Street representatives and the floor given to Musk.

But instead of telling his advice how far he had come to recruit new investors for a possible deal, Musk went back: he no longer believed that going private was in the company's interest, and he would not bring forward a proposal buy out the company.

This would be too distracting, large institutional investors could not all participate and there was no easy way for retail shareholders to be involved, he said to the board.

The directors, some of whom expressed concern about Musk's use of Twitter and irregular behavior, were supportive.

– The New York Times


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