Elon Musk, CEO of Tesla Inc said late on Friday that he would pay attention to shareholders and would no longer pursue a $ 72 billion deal to privatize the luxury electric car manufacturer, leaving behind an idea that baffled investors and overseeing the regulatory authorities.
The decision to leave Tesla as a listed company raises new questions about its future. Tesla shares traded well below their August 7 levels when Musk announced on Twitter that he was considering taking Tesla privately for $ 420 per share, as investors wondered what this meant for Musk's ability to drive the company towards profitability. send.
Musk and Tesla are also faced with a series of lawsuits with investors and an investigation by the US Securities and Exchange Commission into the factual accuracy of the Musk tweet that secured the financing for the deal & # 39; used to be.
Musk said on Friday that his conviction that there are more than enough funds to take the company privately during the trial was strengthened, but said he had abandoned the offer on the basis of feedback from shareholders and because the effort proved time-consuming and distracting. than expected.
"Although the majority of the shareholders I spoke to said they would stay with Tesla if we would go private, the sentiment was in a nutshell:" Please do not do this "," Musk wrote in a blog post.
Musk, who owns about a fifth of Tesla, said earlier that he intended to take the company privately without the standard method of a leveraged buyout, whereby all other shareholders would pay out and the deal would mainly be financed with new debts.
Musk estimated that two-thirds of Tesla's shareholders would have chosen an option to "roll" their interests in a private company instead of paying out. That would significantly reduce the amount of money needed for the deal and prevent the further taxation of Tesla, with a debt of $ 11 billion and a negative cash flow.
Musk said on Friday, however, that a number of institutional shareholders stated that they have internal compliance issues that limit how much they can invest in a private company. He also said that there was no proven path for most private investors to own shares where Tesla would go private.
That assessment is in stark contrast to a 7 August tweet, when Musk said "support for investors has been confirmed", and that the "only reason why this is not certain is that it depends on a vote of the shareholders".
T. Rowe Price Group, Fidelity Investments and Scotland & # 39; s Baillie Gifford, the top shareholders of Tesla, refused to comment.
Musk also said earlier that Saudi Arabia's PIF, which invested in Tesla earlier this year with an interest of just under 5 percent, could help him fund the cash portion of the deal, although sources near the fund for sovereign wealth that had lost prospect. PIF is in talks to invest more than $ 1 billion in Tesla's prospective competitor, Lucid Motors Inc, reported Reuters last Sunday.
Musk said on Friday that he worked with the private equity firm Silver Lake, which previously helped the bankroll computer manufacturer Dell Technologies Inc. take-private transaction, as well as investment banks Goldman Sachs Group Inc and Morgan Stanley, to investigate how he Tesla could take private.
Six members of Tesla's board said in a separate statement that they had been informed Thursday by Musk that he was abandoning his take-private bid. The board then dissolved a special committee of three directors that it had set up to evaluate every offer submitted by Musk.
"We fully support Elon while continuing to lead the company," said the board.
Some experts in corporate governance, however, said that the take-over of the take-private bid by Musk might put the council under pressure to prove its independence and find ways to keep it under control by, for example, a chief operating officer. to switch.
"They have someone in power who has raised serious doubts in the financial and public community about his ability to move the company forward, making it more difficult to invest" in Tesla, said Charles Elson, director of the corporate governance center of the University. from Delaware.
SHORT SELLERS COLLECTED
In explaining his reasons to take Tesla privately earlier this month, Musk quoted pressure from sellers of short sales who want to make a profit on beets that the shares of a company will decline. "Being public means that there are many people who have a tendency to attack the company," says Musk.
Some short sellers were encouraged by Musk & # 39; s u-turn. Christopher Irons, founder of research website quoththeravenresearch.com, said the announcement showed that Musk was not nearly as close to take the company as he had claimed.
"Personally, I'm going to see how the stock opens on Monday, and if it does not suddenly drop on this basis, I'll personally see it as an opportunity to add to my short position," said Irons, whose well-put-options earn money if the share of Tesla decreases.
Tesla shares closed Friday at USD 322.82.
One of Tesla's biggest challenges is to boost the production of its latest vehicle, the Model 3, which is crucial for its efficiency goals.
Tesla is now aiming for a consistent build of 5,000 Model 3's per week, a goal that says it has "succeeded several times" since it reached a week for the first time in June.
Musk has repeatedly stated since April that Tesla does not have to raise new capital, and has promised that the company will be profitable and cash flow positive in the third and fourth quarter.
However, Citigroup Inc analysts wrote earlier this month in a study letter that, if a go-private transaction seems less likely, "it would be wise if Tesla would at least try to attract significantly more new equity sooner than later", so it can inspire investor confidence.