Tesla forms three-member panel to decide on any Musk proposal

Ann Santiago
August 15, 2018

Tuesday's announcement 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. Silver Lake contributed $1 billion for the 2013 Dell transaction.

Tesla announced on Tuesday that the board of directors has created a three-person special committee to consider taking the all-electric vehicle company private. But Tesla's announcement appears to contradict Musk's August 7 tweet in which he said the "only reason why" the deal is not certain "is that it's contingent on a shareholder vote". Silver Lake and Goldman Sachs declined to comment.

Shares in Tesla, which are still well below highs hit when Musk initially raised the prospect of the transaction last week, inched up 0.7% in trading before the bell. Then on Tuesday, the Tesla board said it wasn't clear yet that going private made sense.

The SEC is reportedly looking into Musk's tweets about taking the company private, if Musk tweeted that he had "funding secured" for the process without actually having the money to back it up, it could be argued that the CEO was attempting to inflate Tesla stock prices with the tweet which could spell disaster for Musk. Musk explained in a longer post that he felt confident in going public with his plans after a meeting with Saudi Arabia's public investment fund, who own less than five percent of Tesla.

Saudi Arabia's Public Investment Fund (PIF) manages more than $230 billion in assets, but about 65 percent of that is stakes in large Saudi companies and most of the rest has been committed in overseas deals such as funding commitments to Blackstone Group LP's (BX.N) USA infrastructure fund or SoftBank Group Corp's (9984.T) Vision Fund.

Yasir Othman al-Rumayyan, managing director of the PIF, referred Reuters to the corporate communications team, which did not immediately respond to a request for comment.

Musk said that since his Twitter post on the possibility of a deal the managing director of the Saudi fund had expressed support for proceeding, subject to financial and other due diligence. The PIF board is headed by the Crown Prince Mohammed bin Salman.

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. On Monday Tesla was hit with a third lawsuit, which alleged that Musk's tweet was meant to manipulate the price of the company's stock.

Musk added that most capital for the deal would come from equity and it would not be "wise" to burden the company with added debt.

Musk said that full details regarding the source of funding would be provided before anyone would be asked to decide on going private but that it was "premature" to share such information on Monday.

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