The Securities and Exchange Commission has subpoenaed Tesla Inc. and is seeking information from each Tesla board member, a step up from what previous reports said was a mere inquiry the SEC put in to Tesla.
Jacob Sonenshine of TheStreet.com had the news:
There are two issues playing out as a result of Musk’s take-private tweet. One is the legal issue, with the SEC investigating what many lawyers to believe are real legal questions. The other issue is the financial feasibility of a transaction. It’s pretty clear at this point that this likely won’t be a 100% takeover by one private equity firm, that would have to use heavy debt to finance a roughly $70 billion record deal for a company that has never been profitable. But even in the event that the Saudi Arabian Sovereign Wealth Fund adds significantly to its position in Tesla, which could delight those selling their shares, some of those who would remain owners might not be so thrilled.
Musk said in his blog post on the Tesla website earlier this week that roughly two-thirds of Tesla shareholders would have to roll their shares into private ones if a transaction happens.
“If you go private, your ability to get out reduces significantly because there’s no liquidity,” analyst Gordon Johnson of Vertical Group, meaning that if public shareholders rolled their shares into private ones, it would be hard to sell because they’d have to actively seek a buyer since the company wouldn’t be traded on the public market. “I think it’s going to be hard for them {Tesla} to do anything transactionally,” Johnson said.
Mark Matousek of Business Insider reported that the SEC wants to know if Musk posted to hurt short-sellers:
But Musk didn’t mention any legally binding agreements that were in place at the time he sent the “funding secured” tweet, and he also said he was in discussions with other investors, which suggested some sources of funding may not have been settled before the tweet was sent.
Musk said all relevant parties would be able to review a proposal before a decision was made about going private. He said a proposal would not be presented, however, until discussions with potential investors were finished.
The Saudi sovereign wealth fund first met with Musk early last year about taking Tesla private, Musk said, adding that they’d met multiple times. After the fund purchased about 5% of Tesla’s shares, it requested another meeting with Musk, which Musk said took place July 31. Musk said that during this meeting the fund’s managing director “strongly expressed his support” to contribute funding to take Tesla private.
Robert Ferris of CNBC.com reported that Tesla has a large short interest:
The data firm said roughly 35 million Tesla shares are held short and the cumulative mark-to-market paper loss for those betting against the automaker as of last week was roughly $3 billion for this year. Short selling is a practice in which traders can bet against a company by selling shares they don’t own and buying them back at a lower price.
There are few if any details on where the money for a deal like this would come from. Some legal experts have said that if Musk really had not secured the funding for the deal, he could be accused of fraud or market manipulation.
Since his first tweet Musk said in a blog post that he had had conversations with members of the Saudi Arabian wealth fund about investing in a buyout deal, and said he is working with Silver Lake Partners and Goldman Sachs on the deal. Goldman Sachs moved Tesla to “not rated” status on Wednesday and confirmed it is advising Musk on the deal.
Tesla shares closed Thursday at $335.45, down less than 1 percent, and valuing the company at $57.2 billion.
