Tesla CEO Elon Musk confused the Internet more than usual last week when he announced he was considering taking the company private. He also tweeted that funding had been secured, without going into further detail. Today, Musk is clarifying his proposal, saying that the company has been in talks with the Saudi Arabian sovereign wealth fund to make his plan happen.
In a blog posted on Tesla’s website today, Musk said the fund has approached him “multiple times” about taking Tesla private. He first met with the fund in early 2017. This July, after the fund bought almost 5 percent of Tesla stock through public markets, the fund reached out for another meeting and said it wanted to proceed with the deal.
“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,” Musk said in the statement. He said that Tesla would provide full details of the plan before any final decision is made on taking the company private. He also quelled fears that such a deal would put Tesla deeper in debt. Most of the capital required for going private would come from equity, Musk clarified.
Last week, Musk said shareholders would have the choice to either remain an investor or get bought out at $420 a share. That price is a 20-percent premium over the stock price the company announced after its recent second-quarter earnings call. Musk estimates that about two-thirds of shares owned by all current investors would roll over into a private Tesla. If that’s the case, Tesla would need to buy out the remaining one-third of shares, which would require roughly $24 billion at Musk’s proposed share price.
The U.S. Securities and Exchange Commission was reportedly looking into Tesla after Musk’s tweet last week claiming funding had been “secured.” Although not everyone thought it was a good idea, Musk defended his decision to 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,” Musk wrote in the statement today. “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. As a result, it was clear to me that the right thing to do was announce my intentions publicly.”