Questions loom after Tesla CEO’s latest post
Tesla CEO Elon Musk’s elaboration on his plan to engineer a buyout of the electric car maker could get the Silicon Valley maverick into legal trouble by revealing the deal is far more uncertain than how he initially described it in his brash tweet last week.
If everything falls into place, Musk plans to buy Tesla from any existing shareholders willing to sell using money raised through Saudi Arabia’s sovereign wealth fund.
Until his Monday blog post , Musk hadn’t identified the source for financing a deal that analysts estimate could cost anywhere from $25 billion to $50 billion.
But when he initially dropped his bombshell in an August 7 tweet, Musk stated he had “funding secured” to buy Tesla stock at $420 per share – 23 percent above its August 6 closing price.
That assurance caused Tesla’s stock to surge 11 percent in one day, boosting the company’s market value by more than $6 billion to the dismay investors who had been betting Tesla’s shares would decline.
It now appears as if financing for the deal is far from locked up, although Musk wrote on Monday that he was encouraged to pursue the buyout in a July 31 meeting with the managing director of Saudi Arabia’s Public Investment Fund.
Discussions have continued this month, Musk wrote, while adding the caveat that the deal remained “subject to financial and other due diligence and their internal review process for obtaining approvals.”
That contingency contradicts the financing guarantee that Musk issued in a tweet that already has opened an inquiry by the Securities and Exchange Commission, according to published reports. At least two lawsuits seeking to become a class action also have been filed against Tesla, alleging Musk broke securities laws by making it sound like all the financing for the buyout had been lined up.
“‘Funding secured’ wasn’t exactly funding secured,” said Peter Henning, a law professor at Wayne State University in Detroit and former SEC lawyer. “There are some issues here.”
After reading Musk’s latest post, former SEC commissioner Joseph Grundfest concluded the chances of regulators taking action against Musk are now “quite high.” He believes Musk opened a “self-inflicted wound” by announcing the buyout in last week’s tweet instead of spelling out the situation like he did Monday’s.
Tesla wouldn’t comment on a possible SEC investigation or why it took a week for details to be released. The SEC also declined comment. Six of Tesla’s nine board members said last week they’re evaluating Musk’s proposal, which would end Tesla’s eight-year history as a public company and relieve some of the mounting pressure to reverse its long history of losses.