The saga of Tesla Inc. (TSLA) continues. On Aug. 7, Tesla founder and CEO Elon Musk offered a hint on Twitter as to his plans to take the company private at $420 a share and that he had "funding secured." The immediate response was one of confusion, with investors unsure of whether Musk's Twitter account had been hacked—it was odd to make such an important announcement via tweet.
However, later that day and throughout the rest of the week, Tesla spokespeople confirmed Musk's proposed shift. A message from the Tesla board of directors followed. Still, there have been many lingering questions about the future of Tesla: Where will the funding come from? Why the somewhat arbitrary decision to target $420 a share? What legal issues will the company face in attempting to go private? Now, Musk has released another memo on the Tesla website blog that addresses some of the questions he has received since his initial announcement.
What Has Happened?
Musk indicates in his memo that he consulted with the Tesla board about his desire to take the company private "based on using a structure where any existing shareholder who wished to remain as a shareholder in a private Tesla could do so."
Following those initial discussion, Musk indicated his plans to "reach out to some of Tesla's largest shareholders" to gauge their interest in this shift. Musk's memo does not indicate the results of these conversations or whether they have taken place yet. Similarly, he does not indicate any particular individuals or companies with whom he is meeting.
Addressing the Public Announcement
The memo also addresses Musk's decision to publicly announce his desires to take his company private. He suggests that "it wouldn't be right to share information about going private with just our largest investors without sharing the same information with all investors at the same time." Musk confirmed that his public announcements via Twitter and in the most recent memo are him "speaking for [himself] as a potential bidder for Tesla," not official communications from the company.
Insight Into Funding
One of the most puzzling aspects of Musk's initial tweet was his indication that funding had been secured. In his recent memo, he added some clarification: Musk has had ongoing negotiations with the Saudi Arabian sovereign wealth fund going back nearly two years. Musk explains that he has "no question that a deal with the Saudi sovereign fund could be closed, and that it [is] just a matter of getting the process moving."
Musk's memo indicates that "before anyone is asked to decide on going private, full details of the plan will be provided." Nonetheless, his recent post does not provide many details. Thr Tesla CEO suggests that he has had continued discussion with the Saudi fund as well as "a number of other investors," but does not provide more information than that, other than to say that "most of the capital required for going private would be funded by equity rather than debt." For this reason, Musk suggests, "reports that more than $70 [billion] would be needed to take Tesla private dramatically overstate the actual capital raise needed."
The most recent communication from Musk helps to answer many of the questions that have arisen since he first suggested taking his company private a week earlier. However, it's likely that it has also generated lots of new questions as well. As the process is ongoing, investors can rest assured that more information will become available in time.