Surprisingly, Goldman Sachs makes the cut.
Tesla CEO Elon Musk announced via twitter few hours ago that he has a legal and financial team in place to assist his take private bid.
He said, “I’m excited to work with Silver Lake and Goldman Sachs as financial advisors, plus Wachtell, Lipton, Rosen & Katz and Munger, Tolles & Olson as legal advisors, on the proposal to take Tesla private.
I’m excited to work with Silver Lake and Goldman Sachs as financial advisors, plus Wachtell, Lipton, Rosen & Katz and Munger, Tolles & Olson as legal advisors, on the proposal to take Tesla private
— Elon Musk (@elonmusk) August 14, 2018
Tesla board has asked Elon Musk to hire his own set of advisors. Because, even though he is the CEO of the company, Elon has now made a bid for the company. The board, keeping all shareholder interests in mind needs to look at the proposal, without the bidder influencing them and decide if the proposal is good for all the shareholders.
That’s what Elon has done now, line up his team of legal and financial advisors.
After shocking the market few days ago with a single tweet that he is planning to take Tesla private at a price of $420/share and he has “Secured Funding”, Elon has been using his blog and twitter account to share more details about the deal.
Why Elon Wants to Take Tesla Private? (From his own words)
“As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders. Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term.
Finally, as the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company.”
Though Elon Musk points his fingers at short-sellers, Wall-street’s relentless focus on quarterly numbers and the steady stream of analysts coming out with short term target share price only fuels the news cycle.
For large mature companies with predictable revenue streams this wouldn’t necessarily be a problem but for disruptive companies like Tesla, upgrading and downgrading the stock based on what they will do 90 days from now does cause enormous hurt, especially if the company needs access to capital markets to fuel its growth.
Why did Elon say “Funding Secured”?
Had Elon just tweeted that he plans to take the company private, not much would have happened. But Elon added that funding was secured with a buyout price of $420 – In a way those are market breaking words because it sets a guaranteed minimum price for the share price to reach if the deal goes through.
Elon Musk has been letting details trickle over the last few days.
According to Elon, he used twitter because he wanted all shareholders to get the details at the same time. Fair Enough.
Saudi Arabia’s Sovereign Wealth fund is the source that’s backing Elon Musk with Tesla’s go private deal. Tesla CEO says that the Saudi’s approached him multiple times over the last two years for taking Tesla private.
Why did I make a public announcement?
The only way I could have meaningful discussions with our largest shareholders was to be completely forthcoming with them about my desire to take the company private. However, 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.
Why did I say “funding secured”?
Going back almost two years, the Saudi Arabian sovereign wealth fund has approached me multiple times about taking Tesla private. They first met with me at the beginning of 2017 to express this interest because of the important need to diversify away from oil. They then held several additional meetings with me over the next year to reiterate this interest and to try to move forward with a going private transaction. Obviously, the Saudi sovereign fund has more than enough capital needed to execute on such a transaction.
Related Article: Morgan Stanley: Elon Musk’s SpaceX stake can be used to fund Tesla Buyout.
Sources:
Tesla Blog: Update on Taking Tesla Private
Tesla Blog: Taking Tesla Private
