Tesla, Inc.’s (TSLA) board of directors has created a special committee of three independent directors to look at the go-private proposal made public on Twitter by Chief Executive Elon Musk last week.
In a press release Tuesday, the electric car company said the special committee will include Brad Buss, Robyn Denholm and Linda Johnson Rice. The committee has retained Latham & Watkins as legal counsel and plans to bring on an independent financial advisor to help with the review process once it receives a formal proposal. (See also: Tesla Buyout: Conflicting Reports About Saudi Fund Involvement Emerge.)
Board Hasn’t Received Formal Proposal
“The special committee has not yet received a formal proposal from Mr. Musk regarding any Going Private Transaction nor has it reached any conclusion as to the advisability or feasibility of such a transaction,” the company said in the press release. Separately, Tesla noted that the company has retained Wilson Sonsini Goodrich & Rosati to act as its legal counsel in the matter.
The company said the special committee has the full power and authority of the board of directors to take any actions necessary to evaluate and negotiate a potential going-private transaction as well as any alternative transactions proposed by Musk. The special committee said it will provide an update on the process as soon as it makes sense. (See also: Musk Memo Clarifies Plans to Take Tesla Private.)
Some Board Members Blindsided By Tweets
The board’s move to create a special committee to evaluate the potential $420 a share deal Musk tweeted about last week comes after some directors were blindsided by Musk’s surprise tweetstorm. According to a report in The New York Times, citing people familiar with the chain of events that unfolded last week, Musk's tweets weren’t given much thought ahead of time and were not vetted with the company’s board. Musk said he had the funding secured for a $420-a-share buyout, sending the stock soaring. With little commentary about the financing after that, it prompted an uproar including two class-action lawsuits and a potential Securities and Exchange Commission inquiry.
In a blog post Monday, Musk sought to show that the tweets were part of an effort to be completely transparent with shareholders about wanting Tesla to be a private company, but sources told The New York Times it was impulsive and was driven by feelings of anger toward the carmaker's critics.
Tesla is the most-shorted stock in the U.S., and Musk has not hidden his contempt of short sellers in the past. Shorts lost nearly $2 billion in mark-to-market losses when the stock shot up after Musk tweeted about going private. Still, Musk contended in his blog post that Tesla's board was notified five days before he sent out the tweets about the potential deal. He said the board’s outside directors discussed going private without Musk or his brother Kimbal Musk, a board member, present.