By on August 14, 2018

Elon Musk + Tesla Model S Circa 2011

A truly bizarre rumor is just one of the issues facing Tesla CEO Elon Musk as questions swirl following the August 7th announcement that he wants to take the publicly traded company private.

As the U.S. Securities and Exchange Commission looks into Musk’s claim that there’s “funding secured” for the potential buyout, Musk was forced to confront a claim involving, of all things, a rapper, drugs, and spontaneous tweeting. Always a sideshow with this company…

The financial world, on the other hand, wants to know more about this Saudi business.

First off, the salacious stuff. Controversial, outspoken rapper Azealia Banks took to Instagram to accuse Musk of sending out his Aug. 7 going-private tweets after consuming the substance that made the San Francisco Bay music scene so trippy in the late ’60s. She claims that, while staying at his place on the weekend at the request of Grimes, Musk’s performing artist girlfriend, she observed the CEO “scrounging for investors,” apparently out of desperation. Wild stuff from a rapper infamous for saying wild stuff.

Musk told Gizmodo he “has never even met [Banks] or communicated with her in any way.”

With that out of the way, our focus turns to the Tesla buyout deal. Earlier Monday morning, Musk claimed in a blog post that Saudi Arabia’s sovereign wealth fund would be the source of much of the funds needed to take Tesla private at $420 a share. Meetings were held, he wrote, leaving him feeling confident that such a deal could be carried out. A meeting with Tesla’s board of directors was held on Aug. 2, five days before his tweets and subsequent announcement.

However, the New York Times, citing unnamed sources, reports that Musk’s tweets “blindsided” the board, whose members had not cleared the announcement. This immediately prompted scrutiny from the SEC, which wanted to know why Musk hadn’t made this announcement through proper channels, like a regulatory filing. Normally, a company would mention the sum of the secured funding.

Then there’s the issue of the Saudi Arabian sovereign wealth fund. From the NYT:

But three people familiar with the workings of the Saudi fund cast doubt on his account. They said the fund had taken none of the steps that such an ambitious transaction would entail, like preparing a term sheet or hiring a financial adviser to work on the deal.

And even if the fund were ready to move forward with such an agreement, it would invite review by the Committee on Foreign Investment in the United States, the government body that reviews the national-security implications of such transactions.

As concerns about his seriousness continued ramping up, Musk tweeted Monday night that he has taken on Silver Lake Partners and Goldman Sachs as financial advisers, with firms Wachtell, Lipton, Rosen & Katz and Munger, Tolles & Olson serving as legal advisers.

Now, it seems Tesla’s marching more to the SEC’s tune. Per a tweet by David Shepardson of Reuters, Tesla has filed an 8-K announcing its intent to form a special committee made up of three independent directors. The committee, which has not yet received a formal proposal from Musk, is tasked with reviewing the going-private proposal and advising board members on its feasibility.

[Image: Tesla]

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19 Comments on “Elon Musk Starts the Week by Putting Out Fires...”

  • avatar

    My oh my. All this interweb communication is making Musk sound positively…presidential…

    • 0 avatar

      Exactly. Whatever Musk has said pales in comparison to what’s come from the lips and tweets of the man who holds the office that used to be referred to as “leader of the free world”.

  • avatar

    This will happen just like everything else he says will happen. When pigs fly, battery powered pigs of course!

  • avatar
    Middle-Aged (Ex-Miata) Man

    I think it’s fair to ask if Mr. Musk shouldn’t be sent for an extensive drug panel ASAP.

  • avatar

    I smell Russian collusion. Tesla’s massive global sales are scaring the Russians as they fear that world-wide demand for oil will drop to near zero when Model 3 production ramps up, which will crush Russian finances as they lose a key export. Thus in collusion with OPEC, they are seeking to shut-down Tesla by putting hallucination drugs in Elon’s orange juice, which is what is causing all the crazy tweets about wild sales and profit projections and talk of taking Tesla private, which in turn will lead to SEC investigations and investor lawsuits that finally lead to Tesla bankruptcy and a return to higher oil prices.

  • avatar

    Aside from the other insanity surrounding Musk’s latest behavior (I admired Musk in some ways, but he’s gone off the rails on a crazy train), the ultimate irony is that the Saudi Sovereign Wealth Fund is under tremendous financial duress, and given credible information about its cash available for deployment, is highly unlikely to have even 15% of the liquidity that a 60 to 70 billion LBO would require.

    Musk, at the very least, should have lied about another, better-capitalized, more liquid SWF being interested in taking “bumpers full off Model 3s in 30 minutes from delivery time” Tesla private.

    • 0 avatar

      @ DeadWeight
      Estimates are that the Saudi portion would come to about $35B or so, after other large investors also take a chunk.

      WRT to a different SWF, Norway would be a good candidate. They have over $1 trillion under management, also derived from fossil fuels, and are far more progressive on things like electric cars.

    • 0 avatar
      formula m

      Saudi’s decided to make a stand and defend how they treat people like garbage, against the fierce Canadian criticism by withdrawing their Canadian financial investments and throwing a fit. They probably needed to come up with the cash from somewhere and figured they could look like a tough guy on the international stage at the same time.

      Sad to see such a forward thinking American company whore themselves out to the disgusting Saudi government.

  • avatar
    Carroll Prescott

    I hope Muskrat is also making sure that the rear bumpers on his Model T are secured better than with just tape and a prayer.

    • 0 avatar

      Tesla’s are reminding me of when I got a Chinese Roketa scooter drop shipped to my door.

      I was responsible for the Pre-Delivery Inspection, luckily there were lots of online checklists to help me.

      For a cheap scooter? Fine by me.

      For a car? F off and die, Tesla.

  • avatar

    Something that is buried in the story as a really likely kill on this “take private” narrative is:

    And even if the fund were ready to move forward with such an agreement, it would invite review by the Committee on Foreign Investment in the United States, the government body that reviews the national-security implications of such transactions.

    Note that the above is a government agency that deals with technological exports, not the least of their jobs is to make sure that there is a technological peer advantage maintained by the US. Now we can all laugh about how these folks totally failed at their jobs as dozens of industries pushed production overseas.

    Ok laughter over? This committee has killed trillions of dollars in deals over the years. They can be very fickle and its not just a low hurdle to get things past them.

    Usually it results in some stupid holding agreement where capital infusion occurs, point is its not a done deal if the money is coming from overseas. Now add that uncertainty in with everything else and we see that the tweet was terribly informed given how so many ways the deal could fall apart.

    Not that it can’t happen but at the very least its not as easy as slapping a battery and motor in a car, but not as challenging as landing a powered rocket.

  • avatar

    The gentleman who builds my equipment controls relayed the Reno Gigga factory, a rather large building, only has two elevators. Rumor is Panasonic built one of them and only they can use it. Problem is every morning there’s a line of construction workers waiting to use it.

    Interesting in that not only do customers wait for their cars but sub contractors, unless they want to climb stairs, waiting to work as well.

  • avatar

    Seems like this entire thing started with Musk trying to prevent the shorting of Tesla stock. Then he just couldn’t stop…..

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