Tesla Inc’s board named a special committee of three directors on Aug. 14 to evaluate possibly taking the electric carmaker private, although it said it had yet to see a firm offer from the company’s chief executive, Elon Musk.
The Silicon Valley billionaire last week said on Twitter he wants to take Tesla private at $420 a share, valuing it at $72 billion, and claimed funding was “secured.”
Goldman Sachs Group Inc. was still negotiating its terms of engagement with Musk as of Aug. 14, according to a person familiar with the matter. Private equity firm Silver Lake is also not signed up officially as a financial adviser, as it is helping Musk explore how to take Tesla private with no compensation.
Musk had tweeted on Aug. 13 he was working with Goldman Sachs and Silver Lake as financial advisers.
Musk’s effort to associate his potential bid with some of Wall Street’s most venerable institutions, even at the risk of misrepresenting their involvement, comes as pressure has been building on him to justify his pronouncement last week about the “secured” funding.
Goldman declined to comment on Aug. 14.
That earlier tweet triggered investor lawsuits and an investigation by the U.S. Securities and Exchange Commission into the accuracy of his statement, according to multiple media reports.
Musk on Aug. 13 gave his most detailed vision of how a take-private deal could work, but shares ended flat, indicating investor skepticism.
The shares were last down 1.4 percent at $351.34 on Aug. 14.
Musk said on Aug. 13 he had held talks with a Saudi sovereign fund on a buyout that would take Tesla off the Nasdaq exchange—an extraordinary move for what is now the United States’ most valuable automaker. Tesla has a market capitalization of $60 billion, bigger than Detroit rivals General Motors Co. or Ford Motor Co., who produce far more cars.
The company said in the statement the special committee has the authority to take any action on behalf of the board to evaluate and negotiate a potential transaction and alternatives to any transaction proposed by Musk.
The announcement on Aug. 14 means three members of Tesla’s board will now weigh whether it is advisable—or even feasible—to pursue what could be the biggest-ever go-private deal, and they are doing so before receiving a formal proposal from the CEO.
“The special committee has not yet received a formal proposal from Mr. Musk regarding any Going Private Transaction,” the company said in a public filing with U.S. securities regulators, the first it has made since Musk’s tweets last week.
Asked about the outcome of the special committee, analyst Chaim Siegel at Elazar Advisors said, “This is not easy. Anything is possible from pulling something together to nothing. I hope nothing—so the stock can trade and benefit from the earnings inflection,” he said, referring to a promise by Musk the company would turn profitable later this year.
Bloomberg had reported earlier on Aug. 14 that Goldman was not tapped as an adviser when Musk revealed the go-private plans last week.
A BLOGGING, TWEETING CEO
Musk has yet to convince Wall Street analysts and investors that he can find the billions needed to complete the deal. Tesla’s handling of Musk’s proposal and its failure to promptly file a formal disclosure, meanwhile, have raised governance concerns and sparked questions about how companies use social media.
Musk first tweeted he planned to go private and that funding was “secured” last week, sending Tesla shares soaring 11 percent, but investors have appeared skeptical about the details he has provided since.
He blogged on Aug. 13 that recent talks with a Saudi sovereign wealth fund gave him confidence funding was nailed down, but that he was still talking with the fund and other investors.
“Despite Elon Musk’s frustration with being a public company, I think there are more advantages to remaining public,” said CFRA analyst Efraim Levy, citing cheaper access to capital and media exposure due to interest in a public company.
Tesla said the committee consists only of independent directors: Brad Buss, Robyn Denholm, and Linda Johnson Rice.
But corporate governance and shareholder voting advisers Glass Lewis and Institutional Shareholder Services said they do not consider Buss an independent director, due to his connections to a solar panel business the company bought two years ago.
Buss was chief financial officer of solar panel installer SolarCity for two years before retiring when Tesla paid $2.6 billion for the sales and installation firm in 2016. It was Tesla’s last big deal and was criticized by some on Wall Street because the company, founded by two of Musk’s cousins, had seen its business shrink before the takeover.
Denholm, the first woman on Tesla’s board, is chief operations officer of telecom firm Telstra and the ex-CFO of network gear maker Juniper Networks. Rice, the first African-American and second woman to join the board, is CEO of Johnson Publishing Company and Chairman Emeritus of EBONY Media Holdings, the parent of EBONY and Jet brands, according to Tesla’s website.
Tesla’s other board members include Musk; his brother Kimbal Musk; Twenty-First Century Fox’s CEO James Murdoch; Antonio Gracias, founder of Valor Equity Partners; and Ira Ehrenpreis, founder of venture capital firm DBL Partners.
One director, Steve Jurvetson, is currently on leave of absence following allegations of sexual harassment.
Tesla’s board said on Aug. 8 that Musk had held talks with the directors in the previous week on taking the company private.
Latham and Watkins LLP has been retained by the committee as its legal counsel. Wilson Sonsini Goodrich and Rosati will be legal counsel for Tesla itself.
By Supantha Mukherjee