
Update on Taking Tesla Private - chollida1
https://www.tesla.com/blog/update-taking-tesla-private?redirect=no
======
hn_throwaway_99
> I left the July 31st meeting with no question that a deal with the Saudi
> sovereign fund could be closed, and that it was just a matter of getting the
> process moving. This is why I referred to “funding secured” in the August
> 7th announcement.

He has a waaaaaayyy different definition of "secured" than I (and I think the
SEC) do. That tweet is going to cost Tesla and Musk big time.

~~~
garmaine
I don't know, that sounds like a handshake agreement, right? I wouldn't balk
at calling a handshake agreement "secured" given the context.

~~~
gamblor956
Between businesses, a handshake agreement means nothing. If the agreement is
not committed to paper it doesn't exist.

However, a handshake agreement could be valid between individuals depending on
the context.

~~~
tpetry
It‘s funny. In Germany a handshake agreement between individuals is worth
nothing but between businesses it‘s enforcable like a written contract.

~~~
gamblor956
We're not in Germany. Contract laws vary by country and by state.

In the US, the general law is that verbal contracts are worth the paper they
are written on, which is to say, not at all unless other facts/circumstances
support the existence of the verbal agreement _and its specific terms._
Otherwise anyone could claim to have a contract with anyone else.

For example, I claim to have had a verbal agreement with Mark Z for the
development of a social networking site owned by me but built by him. In the
absence of any other facts, no court would agree that such a contract exists.
However, maybe I show copies of emails where we discussed the idea for a
social networking site before it launched. That's some evidence that a verbal
agreement might have existed, but not as to what the terms were. Most likely,
the parties would settle without going to trial, simply because Mark wants to
proceed with the IPO without the sword of litigation hanging over his head--
even though he would very likely win. The marginal cost of winning at trial is
not worth the much larger cost of the harm to the IPO. (This is very loosely
based on the Winklevoss saga.)

~~~
checkyoursudo
Your generalization is backwards. In general, US contracts do not need paper
memorializing. The majority of transactions are not memorialized.

Specific types of transaction and certain value thresholds require
memorializing.

Facts and circumstances are required to support verbal contracts, but _in
general_ verbal contracts very much are enforceable.

~~~
gamblor956
Yes, of course. I'll ignore the law that I actually learned in law school and
in the actual practice of litigating contracts for what some guy said on the
internet...

There's a reason I brought up the falling apple example. Verbal contracts are
enforceable--if they satisfy the same requirements as written contracts. On
top of that, the terms of a verbal agreement must be corroborated by other
evidence outside of the verbal agreement itself in order to survive litigation
--and the trend in the US legal system is to require _more_ supporting
evidence.

------
Nokinside
Private companies are allowed to have up to 2,000 shareholders under they fall
under the same SEC reporting requirements as public companies. Tesla could
keep big investors and smallish investors with over $1 million in investable
assets or yearly income above $200k if they accredited themselves.

Other issue is what kind of owner PIM is. In principle it's long term patient
investor.

KSA has a new active prince/ruler that is self assured and proud. He is really
sovereign and relationship to him must be well managed. We all know that Musk
not a diplomat in his public or private communications.

Saudis have had little bit of cash flow problems because they have constant
budget deficit is typically 10-15 percent of their GDP or ~$50B/year and it
probably just grows in the future . On paper PIM has $2 trillion in assets,
but most of it is Saudi Aramco. Aramco IPO would generate cash flow but it's
delayed, probably because there is fair amount of air in the valuation. Saudi
Arabia has previously inflated it's oil reserves as a political decision to
match some OPEC agreements and real production capacity potential is top
secret.

If KSA continues to have cash flow problems and Tesla is disappoints somehow,
Tesla may end up at the hands of corporate raiders like Carl Icahn.

------
csomar
$358 is what TSLA is trading at right now (30minutes after this blog post hit
HN). I'm guessing the traders are calling BS on whatever Musk has in hands.

Imo, this looks like a stage to liquidate shorters (which Musk hates). Musk
could have mentioned here that S.A. had "committed" in some way to a private
deal. He didn't. They are still negotiating.

There is literally 0 reasons why the stock will trade below $420 if the
funding was "secured" let alone trade 15% below that.

~~~
freerobby
There's more to a buyout than the funding though; lack of board approval or
any agreement on terms (i.e. not just financial terms) are obviously deal-
breakers.

Certainly the market doubts whether this deal will go through, but it's not
clear to me that it's all about Tesla's access to capital.

~~~
csomar
I'd like to be convinced otherwise (both because I like what Tesla is doing
and I think Musk is a great executer) but I don't find anything on that blog
post that suggest that "funding is secured".

~~~
freerobby
Oh, I agree about that. I'm just saying that even if everybody felt that
funding was secured, the price would still not be at $420, because there are
other risks of a deal like this falling through.

~~~
csomar
Sure but this means that interested investors are willing to put $420 for
Tesla. Which means its' price should be higher.

------
noir_lord
That sounds like a retroactive arse covering exercise.

~~~
mikedouglas
Specifically the section on "funding secured". Any reasonable person would
interpret that as Musk having a term sheet in hand. This sounds more like
"funding potentially interested".

~~~
dwighttk
Especially since he later claimed: "Only reason why this is not certain is
that it’s contingent on a shareholder vote."

------
abhiminator
> Saudi Arabian sovereign wealth fund has approached me multiple times about
> taking Tesla private.

Interesting to see countries most dependent economically on fossil fuels
heavily investing in their energy nemesis.

Curious about the ramifications that might emanate out of partly giving away
control of a large American automobile manufacturer to a foreign entity -- a
potentially hostile one no less -- given how sensitive Tesla vehicles'
proprietary technologies are from a safety/security standpoint.

~~~
dragonwriter
> Interesting to see countries most dependent on fossil fuels heavily
> investing in their energy nemesis.

Saudi Arabia and Kuwait have been hedging against fossil fuels massively for
many decades. It's been a driving force behind major regional conflicts with
global participation, so it's kind of one of those things that people should
generally be aware of.

> Curious about the ramifications that might emanate out of partly giving away
> control of a large American automobile manufacturer to a foreign entity

You mean like when Chrysler got taken over by Fiat?

~~~
toyg
To be fair, FIAT was hardly ever under the sort of nation-state influence that
a sovereign fund is. They occasionally made business that "pleased", let's
say, the Italian government, but it was decades before the Chrysler deal, and
it was pretty rare anyway. Usually the relationship was the other way around,
with the state making moves for the company to profit from, which is expected
for any company.

Sovereign funds are direct emanations of nation-states, which is different.
When they buy a somewhat-strategic industrial asset, it is significant. The
question is whether the US (and particularly this fossil-fuel-friendly
administration) actually see Tesla as strategic at all - my guess is that the
guys currently in charge wouldn't care one bit.

------
jaaames
It's disconcerting this is written in the first person from Musk and not from
a communications team as a public statement from the company.

I think it's rather Freudian about his world view and behavior. He seems to
have an opinion on everything and disregard experts left and right.

I certainly wouldn't be comfortable with this personality running a company
this size. Some CTO/engineering role, sure, CEO and board member with
everything that entails is a time bomb.

~~~
mergejoin
Have you considered the possibility that this blog article was reviewed by
legal experts before being posted? I don't know of course but that's a
possibility.

------
AlexandrB
How is Tesla going private if the goal is for potentially _all_ its current
shareholders to remain? Isn't there a limit on the number of investors a
private company can have[1]? What if I own Tesla stock? Do I become a private
shareholder afterwards? Does this just mean I don't get quarterly reports
anymore? What if I still want to get quarterly reports? If I _am_ still
getting the same reporting as before, in what meaningful way is Tesla private?

None of this makes a lick of sense.

[1] [https://blog.gust.com/limiting-the-number-of-shareholders-
in...](https://blog.gust.com/limiting-the-number-of-shareholders-in-private-
companies/)

~~~
JumpCrisscross
> _if the goal is for potentially all its current shareholders to remain?_

Revise "all current shareholders" to "all current material shareholders" and
Elon's tweets make more sense.

> _Isn 't there a limit on the number of investors a private company can
> have?_

Not technically. But you have to do all the expensive things a public company
does if your "securities are 'held of record' by either 2,000 persons, or 500
persons who are not accredited investors" [1]. Practically speaking, those are
the limits.

[1] [https://www.sec.gov/info/smallbus/secg/jobs-act-
section-12g-...](https://www.sec.gov/info/smallbus/secg/jobs-act-
section-12g-small-business-compliance-guide.htm)}

~~~
berberous
A tweet from him: "My hope is _all_ current investors remain with Tesla even
if we’re private. Would create special purpose fund enabling anyone to stay
with Tesla. Already do this with Fidelity’s SpaceX investment."

Still doesn't really make sense to me though. Not sure how that would work.

~~~
JumpCrisscross
> _A tweet from [Musk]: "My hope..._

Elon expressed a hope, not a goal.

Fidelity's SpaceX SPV is restricted to a small number of accredited investors.
Goldman tried the "put investors in a box, put the box on the cap table, and
call the box 1 investor" schtick when Facebook was private [1]. While Facebook
went public before they fell afoul of the law, the authorities clearly
expressed their views on such structures [2].

[1] [https://dealbook.nytimes.com/2011/01/03/facebook-and-
the-500...](https://dealbook.nytimes.com/2011/01/03/facebook-and-
the-500-person-threshold/)

[2]
[https://www.wsj.com/articles/SB10001424052748704723104576062...](https://www.wsj.com/articles/SB10001424052748704723104576062280540485652)

------
mabbo
Musk needs to step out of the limelight. It's obvious that he loves it, but
half the news about him is the stupid things he's done or said on Twitter or
on blog posts. It does him no favors and makes him look like a child who has
just figured out he can scream, and that the world will react when he does[0].

Elon, go back to what you're best at: inventing, being in the lab, running the
factory, making the world better with your mind. Stop trying to be famous
because it does you more harm than good.

The biggest danger to Tesla today is an over-inflated ego.

[0](I wonder if any politicians have figured this out?)

~~~
knight-of-lambd
I disagree from a practical standpoint. Personal infamy is essentially free
advertisement, up to a certain limit. As long as Elon isn't perceived as
running the company into the ground.

He spends a few seconds tweeting and suddenly his name and Tesla is plastered
over the next news cycle. Great ROI.

------
uhnuhnuhn
A Saudi government owned Tesla will lose me as a customer. If you're eager to
do business with the Saudi government your moral compass is seriously out of
whack.

~~~
berberous
Greater good? For all the advantages and potential success of TSLA, it is in a
precarious financial position and could fail. If the Saudis want to dump money
into it and accelerate the world's transition to solar and electric cars,
seems like a net win to me.

~~~
rsynnott
If Tesla collapsed tomorrow, I don't see that that'd make a huge difference to
adoption of electric cars in the long-term. Arguably, Nissan collapsing would
be worse. The Leaf is a much better model for widespread adoption than Tesla's
stuff.

~~~
MrEfficiency
I was going to say GM's Bolt/Volt since it was one of those 'best cars of the
year'. If that fails + is electric, thats a bad indicator for the future.

Tesla gets a pat on the back for trying to be new/different. The quality of
Tesla is nothing like established companies. You cant even blame Tesla, they
dont have data like a company thats been around for decades.

~~~
rsynnott
> I was going to say GM's Bolt/Volt since it was one of those 'best cars of
> the year'.

Barely available outside the US. There's the Opel Ampera, which is mostly a GM
Volt, but it's weirdly expensive so no-one buys it. The Leaf is the world's
best-selling electric car, for now (especially if you include its very close
relatives like the Renault Zoe; I don't think that's precisely the same
platform, but it's close).

~~~
greglindahl
GM doesn't get California credits for selling Bolts outside of California and
the other states that follow the California standard.

Isn't the Leaf about to stop being the world's best-selling electric car?

~~~
rsynnott
It's possibly been replaced by the BAIC EC, at least for the first part of
this year. That's unlikely to last, though; the Chinese market is too
fragmented for that. The BAIC EC is also of very limited relevance worldwide.

------
liaukovv
To me it seems that the deal relies on 2/3 of current investors being willing
to keep their money in the company while losing any leverage they have to
control Elon at least in some way. I wonder if these estimations are correct,
especially for bigger funds.

~~~
martin_bech
Not at all true. if you have 20% of the stock of a private or public company
is exactly the same voting wise etc. The only difference, is thats its
publicly traded, and the pros and cons of that (very liquid, quarterly reports
etc.).

------
haaen
I'm wondering how Musk's compensation scheme will change when Tesla becomes
private again. It was approved a few months ago by Tesla shareholders. It
gives Elon Musk no salary, only restricted stock awards. They can reach a
value of tens of billions of dollars. Restrictions for the full package: Tesla
has to reach annual sales of 175 billion and the stock market has to give TSLA
a market cap of 650 billion.

------
paulus_magnus2
__capital required for going private would be funded by equity rather than
debt,

 __approximately two-thirds of shares owned by all current investors would
roll over into a private Tesla.

Musk needs to find 23 friends willing to put $1b into a retirement-fund. The
fund takes over the existing shares and buys whoever wants to exit at $420.

------
JumpCrisscross
> _the Managing Director of the [Saudi Arabian sovereign wealth] fund_

Does anyone know to whom this refers?

~~~
whatok
[https://www.bloomberg.com/research/stocks/private/person.asp...](https://www.bloomberg.com/research/stocks/private/person.asp?personId=241125061&privcapId=12455701)

that's what "PIF managing director" on google gives me.

------
panarky
This is strategic for the Saudis.

Other strategic investors and sovereign wealth funds that will not want to see
Tesla controlled by a competitor for 10% over today's price.

Norway, China and Abu Dhabi each have SWFs larger than Saudi Arabia [1], and
the energy implications of letting Tesla go would be strategic for each of
them.

Tesla's market cap is only 6% of Apple's, and Apple isn't geopolitically
strategic. We may see a bidding war for Tesla before they go private.

[1]
[https://en.wikipedia.org/wiki/Sovereign_wealth_fund#Largest_...](https://en.wikipedia.org/wiki/Sovereign_wealth_fund#Largest_sovereign_wealth_funds)

------
shriver
> To be clear, when I made the public announcement, just as with this blog
> post and all other discussions I have had on this topic, I am speaking for
> myself as a potential bidder for Tesla.

Elon Musk sent an e-mail to all his employees on August 7th, and published the
e-mail to the world. In the e-mail he made a number of quite worrying
statements as the CEO of the company and some outlandish claims. One week
later on August 13th, Elon Musk rips off his mask and cackles manically:
Behold! It was me all along! Not the mild mannered CEO of your heart, but I
have been secretly talking as a potential bidder for your company! Moohahaha.

------
WhompingWindows
I'd be interested to know who besides the Saudis are interested. Who are the
biggest players? I'm guessing Elon has many, many wealthy friends with huge
numbers of Tesla shares that are interested in this plan.

~~~
jbergens
Maybe he could contact the Norwegian Oil Fund also. They should also be
interested in something else than oil and Tesla sells a lot of cars there.

[https://www.nbim.no/en/the-fund/](https://www.nbim.no/en/the-fund/)

~~~
agnsaft
I cannot possibly imagine that Norway would gamble with such a large stake in
a single company. Such funds usually have some strategies to reduce risk and
thereby protect the wealth of their citizens.

------
_Codemonkeyism
Sounds like trying to get the SEC away.

------
runamok
I'm confused why elon says 2/3rds of shareholders would keep invested in a
private Tesla. How would they ever get their money back out? Only if they went
public in future or if they sold to another party? Based in their market cap
compared to GM, Toyota, etc. that seems a bit crazy.

~~~
nickik
You can still trade stocks and there are events to do that.

------
MrEfficiency
Any idea why the Saudi (government) wants to buy Tesla?

Is it part of the oil conspiracy to kill electric vehicles?

Given how GM, Nissan, and others have electric vehicles, I dont think this
could stop the new wave of buyers.

Anyone want to take a stab at why this is happening?

~~~
JumpCrisscross
> _Any idea why the Saudi (government) wants to buy Tesla?_

They believe it to be a good investment and think (a) Tesla's management will
do better without the public market's constant scrutiny and/or (b) their own
books could benefit from less apparent volatility.

> _Is it part of the oil conspiracy to kill electric vehicles?_

Probably not. The Saudi sovereign wealth fund has been set up as a hedge
against their oil-based economy.

------
memossy
Musk betting the farm on the Saudis basically saying 'Insh'Allah'

------
jasonmaydie
Saudi Arabia? I know they have money but it's like selling your chicken coop
to a snake

~~~
WhompingWindows
No, it's Saudi Arabia attempting to diversify its holdings. If they've seen
oil-rich countries fall again and again to low oil prices, it makes a lot of
sense for them to hedge their bets and protect against the future where solar
(they're investing a ton in this) and EVs may remain supreme. If these
investments don't pan out, they still have a massive amount of very cheap oil
reserves and will keep those longer than most other oil producers.

~~~
InitialLastName
>If they've seen oil-rich countries fall again and again to low oil prices

... especially in context of how successful they've been at lowering oil
prices to hurt their rivals.

