When Elon Musk declared this month that he wanted to take Tesla privately, his management was overwhelmed. Barely three weeks later, the chief executive told the board that he had changed his mind. Tesla would still remain public.
The shocking turnaround – Friday night announced blog post, a day after discussing it with executives – limited a tumultuous series of moves that attracted Wall Street's largest investment banks, led to a survey by regulators, and raised new questions about the leadership of mr. Musk.
At that time, according to five people in the vicinity of the events, Mr. Musk came to the realization that his thinking had been too simplistic. While going private might have eliminated some of the problems, it would have introduced new ones.
One of his concerns was to transfer too much control to private investors – including conventional car companies and Saudi Arabia, a symbol of big oil – and to exclude smaller investors who might not hold any interest.
These were issues that were both symbolic and intrinsic to Tesla, which set out its future in making electric vehicles the transport of choice – a vision that has made it the most appreciated car company in the country. Even with its shares worth $ 55 billion, this has to do with concerns that many young companies have in common, including the vulnerability to the whims of public shareholders.
In turn, mr. Musk re-examined because his impulsiveness has been real-time in the stock market, with billions of dollars at stake.
And even with the decision to remain patient, Mr. Musk and the company could remain in the sight of the Securities and Exchange Commission on the circumstances of the original announcement.
"Investors at Tesla must realize that they are a panicky, erratic and possibly self-destructive C.E.O. at the helm," said Jeffrey Sonnenfeld, a professor at the Yale School of Management. "No C.E.O. is ever so confusing and confusing."
For years, Mr. Musk had suggested 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. Instead, Mr. Musk 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 of his being Post Twitter On August 7, he announced his thoughts and said he had "financing", other considerations came into play.
In his note that Tesla would remain public, mr. Musk four main 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.
In the eyes of people who were familiar with Mr Musk's thinking, the deepening of ties with new private investors presented his own challenges. By taking money from the sovereign wealth fund of Saudi Arabia – something that Mr Musk said he was convinced – Tesla would work with a country whose base was fossil fuels, and one that often criticized human rights grounds.
That cognitive dissonance – a company with an electric car backed by large oil – was pointed out to Mr Musk several times, these people said.
When representatives of Tesla contacted officials from the Saudi fund and other sovereign funds, it also became clear that they might want more than just Tesla shares in exchange for an investment. Some, said someone who was informed about those conversations, would expect Tesla to open up production activities in their countries, for example.
And while several large car manufacturers approached Tesla to finance a deal, people familiar with the discussions said that there were also problems. Some of those companies have their own reputation baggage. And Mr. Musk, proud of the fact that Tesla's cars were made in America, wanted foreign interests not to dictate his decisions about production.
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, head of Baillie Gifford, Tesla's largest shareholder after Mr. Musk, in an interview before Mr. Musk concluded a deal. "We have had this meeting with Mr. Musk himself, he understands that there is a problem here. & # 39;
The same was probably true for other institutional investors in Tesla, including T. Rowe Price, BlackRock and Fidelity. And Mr. Musk heard from many individual investors who wanted Tesla to remain public. On Thursday, a small Tesla investor issued a public letter in which he begged Mr. Musk 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 regularly scheduled 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 made a presentation expressing confidence in their ability to find investors for a deal to take Tesla privately – a transaction that might have claimed $ 24 billion or more – Wall Street representatives left the room and the word was given to the Lord Musk.
But instead of telling his advice how far he had come to recruit new investors for a possible deal, Mr. Musk back: he no longer believed that going private was in the interests of the company, and he would not make a proposal to buy 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 them though expressed concern about the use of Twitter by Mr. Musk and irregular behavior – were supportive.
During the meeting, the board voted to dissolve the special committee that was set up to evaluate a possible deal. And before lunch, the meeting – held in the same room where Mr. Musk sometimes sleeps during late nights at the factory – was over.
Later that day, mr. Musk issued a statement announcing that Tesla would remain public, which the board approved Thursday night. On Friday, refined by the office of SpaceX, his private rocket company, located near Los Angeles, sophisticated Mr. Musk and his team the letter.
In the statement, even when he withdrew from the idea of going private, Mr Musk doubled his original claim that he had financial support. "My conviction that there is more than enough financial means to take Tesla privately is reinforced during this process," he said.
Nevertheless, the S.E.C., who investigates or the original tweet of Mr. Musk about a potential buy-out in violation of securities legislation, perhaps more to say about the sequence of events, especially the statement with the financial security. The first tweet caused the share of Tesla to rise sharply and caused a stoppage of trading in anticipation of a fuller announcement. The shares taped off in the weeks that followed and never came close to the $ 420 buyback price that, according to Mr. Musk, was anticipated, pointing to investor skepticism.
"In a sense, it reduces the impact of the first tweet," said Peter Henning, a law professor at Wayne State University, about the reversal. "But the S.E.C looks at what is happening at the time of the unveiling, but later walking back does not have to soften the effect, and it was clearly incomplete."
"You can not throw away information that moves the market and say," Leave it, "" Mr. Henning added. "This is the company's C.E.O. His statements are the company's statements, will they make an example of him?"
And although Mr. Musk might have reassured some constituencies, management experts continued to shake their heads to the chaotic process that began with a tweet when Mr. Musk Tesla Model S drove through Los Angeles just over two weeks ago.
"A large company should not determine its property and market value by the hectic, public, volatile impulses of the C.E.O.", said Sonnenfeld. "Let alone by the selective revelations of elite referenda to shareholders."
Kate Kelly and Jessica Silver-Greenberg contributed to the reporting.
Follow David Gelles on Twitter: @dgelles.