- Tesla CEOElon Musk has attracted controversy for his statements on August 7 about taking Tesla private.
- The announcement, which took a lot of people by surprise, started a wild few weeks of speculation and accusation, with Musk at the center.
- On August 24, Musk formally abandoned the go-private plan and said Tesla would remain a public company.
Tesla CEO Elon Musk shocked observers when he said on August 7 that he was thinking about taking the company private.
That plan came to an abrupt conclusion on August 24, when Musk and Tesla formally abandoned the idea. They had whipped up a whirlwind that got the attention of everyone, including Wall Street regulators.
Here’s what you need to know to make sense of the saga.
November 15: Elon Musk says in a Rolling Stone interview that he wishes Tesla were a private company.
“I wish we could be private with Tesla,” Musk said in the interview. “It actually makes us less efficient to be a public company.”
July 31: Musk is said to have met with the managing director of Saudi Arabia’s sovereign wealth fund.
Musk said in a statement published on Tesla’s website on August 13 that he had a meeting with the managing director of Saudi Arabia’s sovereign wealth fund on July 31.
Musk said that during this meeting, the director “expressed regret that I had not moved forward previously on a going private transaction with them, and he strongly expressed his support for funding a going private transaction for Tesla at this time.”
“I understood from him that no other decision makers were needed and that they were eager to proceed,” Musk added. “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.”
The Saudi sovereign fund did not respond to a request for comment.
August 1: Tesla reports second-quarter earnings amid fear the company is running out of cash.
Tesla reported an adjusted loss per share of $US3.06 for the second quarter – larger than what analysts had predicted – and revenue of $US4 billion, which beat analyst projections.
Its cash burn, $US739.5 million, was lower than analysts expected. The company said it expected to be profitable in the second half of 2018.
“Going forward, we believe Tesla can achieve sustained quarterly profits, absent a severe force majeure or economic downturn, while continuing to grow at a rapid pace,” the company said.
Musk also apologised for saying during Tesla’s first-quarter earnings call in May that Antonio Sacconaghi, a Bernstein analyst, had asked “boring, bonehead questions.”
“I’d like to apologise for being impolite on the prior call,” Musk said on the second-quarter earnings call. “Honestly, I really think there’s no excuse for bad manners, and I was kind of violating my own rule in that regard. There are reasons for it in that I had gotten no sleep, had been working 110-hour, 120-hour weeks, but nonetheless, there’s still no excuse.”
August 2: Musk claims he told Tesla’s board he wanted to take the company private at $US420 per share.
In his August 13 statement, Musk said that after first telling the board about his desire to take Tesla private, the board’s outside directors met without him. Musk said he later met with them again to talk about the discussions he’d had about financing a go-private deal.
August 6: The British diver Musk called a “pedo” prepares to sue him, accusing him of libel.
In a tweet in July, Musk called Vernon Unsworth, a British diver, a “pedo guy” and said he would bet money to back his accusation. Unsworth had said the miniature submarine Musk designed and sent to Thailand to help with the rescue of a boys soccer team and their coach would have been ineffective and was merely a publicity stunt.
Musk later apologised to Unsworth and deleted the tweet.
In a letter to Musk on August 6, L. Lin Wood, a lawyer retained by Unsworth, wrote that he was “preparing a civil complaint for libel” against Musk and accused Musk of making “false and defamatory statements” suggesting Unsworth is a pedophile.
In the letter, Wood invited Musk and his legal representatives to contact him to avoid a lawsuit.
August 7: Musk sends his “funding secured” tweet.
“Am considering taking Tesla private at $US420. Funding secured,” Musk said on Twitter before issuing a formal statement on the company’s website.
Musk said in the statement that a shareholder vote must be held before a final decision is made. But he tweeted that investor support was confirmed.
Taking the company private is “the best path forward,” Musk said in the statement. He said the pressures of being a public company created distractions and promoted short-term thinking that might not produce the best decisions in the long term.
Musk’s statements raised questions about the certainty of funding he referenced and where exactly it would come from.
August 7: Tesla’s stock jumps as high as 12%, closing at $US379.57.
Tesla’s share price surged after Musk’s “funding secured” tweet, rising by as much as 12%, to over $US381, before settling at $US379.57 when trading closed on August 7.
August 8: Tesla’s board posts a brief statement about Musk’s desire to take Tesla private.
Tesla board members Brad Buss, Robyn Denholm, Ira Ehrenpreis, Antonio Gracias, Linda Johnson Rice, and James Murdoch said in a statement that Musk began a discussion with them the previous week about going private. They said they had met multiple times since.
August 8: Reports emerge that the Securities and Exchange Commission is making inquiries into Tesla about Musk’s “funding secured” tweet.
According to the publication, the SEC was also looking into why Musk’s first statement about the potential of taking Tesla private was made on Twitter instead of in a regulatory filing.
The agency asked the company whether it believed Musk’s tweet followed SEC rules about protecting investors, The Journal reported.
August 9: News breaks that the board has asked Musk to recuse himself as it explores the possibility of going private.
CNBC reported that the board planned to meet with financial advisers to determine how it would explore the idea of converting Tesla into a private company and that it had told Musk that he must consult a separate, personal set of advisers.
August 10: Reports emerge that Tesla is in early discussions about funding to go private.
Bloomberg reported that Tesla had begun discussions with some potential investors and was talking with banks about whether it would be able to make a deal and what that deal would look like, but it hadn’t yet hired a bank to formally assist in the process.
August 10: Two lawsuits filed against Musk and Tesla allege securities fraud.
Two Tesla investors filed separate lawsuits accusing Musk of misleading investors and manipulating the company’s stock price with his statements about taking the company private.
August 13: On Monday morning, Musk reveals new details about why he sent the “funding secured” tweet.
In a blog post, Musk said he used the phrase “funding secured” because he believed after the July 31 meeting with Saudi Arabia’s Public Investment Fund’s managing director that there was “no question” the fund would provide backing for a deal to convert Tesla into a private company.
He made the announcement via Twitter, he said, because he wanted all Tesla investors to know about the possibility of Tesla going private at the same time.
August 13: Azealia Banks says that she was at Musk’s house over the weekend and that he was “scrounging for investors.”
Banks told Business Insider that while she was at one of Musk’s homes in Los Angeles, Musk seemed concerned about getting financing for a potential go-private deal.
A representative for Musk said he had never met or communicated with Banks but did not deny that Banks had stayed at one of his homes during the period Banks specified.
Tesla declined to comment on Banks’ claims about Musk’s efforts to find investors.
August 13: Musk tweets in the evening that he is working with Goldman Sachs and Silver Lake as financial advisers on a proposal to take Tesla private.
“I’m excited to work with Silver Lake and Goldman Sachs as financial advisors, plus Wachtell, Lipton, Rosen & Katz and Munger, Tolles & Olson as legal advisors, on the proposal to take Tesla private,” he said.
August 13: The New York Times reports that some members of the board were blindsided by the “funding secured” tweet.
According to The Times, Musk told an informal adviser he sent the tweet because he had difficulty keeping information to himself and was frustrated with the company’s critics.
August 13: Tesla hit with another securities-fraud lawsuit.
A complaint filed in US District Court in California alleges that some investors purchased Tesla stock “at artificially inflated prices and suffered significant losses and damages once the truth emerged” that Musk had not secured the funding necessary to convert Tesla into a private company for $US420 per share when he tweeted.
August 14: Tesla’s board forms a special committee to review a plan to take the company private.
Three independent board members – Buss, Denholm, and Johnson Rice – will sit on the special committee. Musk would need its approval before a deal to take Tesla private could be approved.
August 14: A fourth lawsuit is filed against Tesla.
Jalopnik reported that a fourth lawsuit had been filed against Tesla, alleging securities fraud.
According to the US District Court in California’s website, the lawsuit was filed on August 14.
August 15: The SEC reportedly subpoenas Tesla.
The Fox Business reporter Charles Gasparino said on Twitter that sources had suggested the agency was moving into a formal investigation of Tesla. Gasparino added that SEC officials had concerns about how the agency’s investigation could affect Tesla’s ability to go private.
August 15: Goldman Sachs officially signs on to advise Musk on his plans to take Tesla private.
Goldman Sachs said it would be “acting as a financial advisor in connection with a matter that is fundamental to the reasonable analysis of the rating and price target for the stock.”
The firm also said it was suspending its research coverage of Tesla.
August 16: The Journal reports that the SEC is investigating whether Musk was trying to hurt short sellers with his “funding secured” tweet.
The Journal reported that the SEC was investigating whether Musk was attempting to hurt the company’s short sellers when he tweeted about taking the company private.
According to the report, the agency was asking Tesla’s board of directors what Musk told them before he tweeted that he had secured the funding to convert Tesla into a private company, were the proposal to pass a shareholder vote.
August 16: The Times publishes a revealing interview with Musk in which he said that he didn’t regret his “funding secured” tweet and that he planned to stay on as CEO of the company.
And though Musk’s “funding secured” tweet could end up costing both him and the company, he said he did not regret it.
August 17: Tesla short sellers reportedly make about $US1 billion.
Following Musk’s Times interview, Tesla’s share price dropped almost 9%, and it fell slightly more during after-hours trading.
Tesla short sellers made about $US1 billion that day, The Times reported, citing data from the analytics firm S3 partners.
August 19: Musk defends his work habits.
In response to Musk’s comments to The Times about working up to 120 hours per week, Arianna Huffington wrote in a post on Thrive Global published August 17 that Musk’s work habits were unhealthy and unproductive.
“You’ve come up against incredible challenges, and you’ve met them by being ever more rigorous and determined about applying the latest science,” she wrote. “But at the same time, you’re demonstrating a wildly outdated, anti-scientific and horribly inefficient way of using human energy. It’s like trying to launch us into our clean energy future (or into space) with a coal-fired steam engine. It just won’t work.”
Musk responded to her via Twitter early on August 19, suggesting that he had no choice but to work long hours.
“Ford & Tesla are the only 2 American car companies to avoid bankruptcy,” he said. “I just got home from the factory. You think this is an option. It is not.”
August 21: Morgan Stanley halts its coverage of Tesla.
Morgan Stanley halted its research coverage of Tesla, a move that indicated it might be working with Tesla in some capacity as the company explores the possibility of going private.
August 24: Musk announces that Tesla will remain a public company.
Musk’s announcement concludes what had been weeks of speculation and hand-wringing around the go-private proposal Musk first revealed in the August 7 tweet.
In a blog post on Tesla’s website, Musk said discussions with existing shareholders and financial advisers found little appetite for such a move.
“After considering all of these factors, I met with Tesla’s Board of Directors yesterday and let them know that I believe the better path is for Tesla to remain public,” Musk wrote. “The Board indicated that they agree.”
August 27: The Journal reports that Volkswagen wanted to invest in a private Tesla.
Tesla declined Business Insider’s request for comment, and Volkswagen did not respond to a request for comment.
According to The Journal, Musk had reservations about letting rival automakers invest in Tesla, thinking they would be attempting to benefit from what he reportedly called the “Tesla halo.”
The Journal also reported that the potential new investors in a deal to take Tesla private would want a significant amount of influence over the company, though the publication did not specify whether Volkswagen specifically requested those or similar terms.
August 28: Musk and The Times disagree over whether Musk cried during his interview.
The Times said Musk “alternated between laughter and tears” in his interview earlier in the month.
Musk said on Twitter that while his voice cracked during the interview, he didn’t cry.
“For the record, my voice cracked once during the NY Times article,” he said. “That’s it. There were no tears.”
In the first story, Musk was described as having “choked up multiple times” during the interview, which a follow-up story said took place over the phone.
A Times represented said the publication stood by its description of Musk in the interview.
“Mr. Musk’s emotion was audible,” the representative said. “It is not true that his voice only cracked once.”
August 31: Musk says he was thinking like a casino owner when he sent his “funding secured” tweet.
“If the odds are probably in your favour, you should make as many decisions as possible within the bounds of what is executable,” Musk said.
He then compared his situation at the time to that of a Las Vegas casino.
“This is like being the house in Vegas. Probability is the most powerful force in the universe, which is why the house always wins,” he said. “Be the house.”
September 5: Musk reportedly hires a lawyer who used to work for the SEC.
One of the lawyers Musk reportedly retained, Roel Campos, was an SEC commissioner from 2002 to 2007. Campos, a partner at the firm Hughes Hubbard & Reed, lists securities enforcement, securities litigation, and regulatory cases among his areas of focus on the firm’s website.
Musk also reportedly retained Steven Farina, a partner at Williams & Connolly who focuses on securities enforcement and securities litigation, among other practice areas, according to the firm’s website.
Tesla, Campos, Farina, and Kramer did not respond to Business Insider’s requests for comment.
September 6: The notorious short-seller Andrew Left sues Musk and Tesla.
Andrew Left, the Tesla short seller who founded Citron Research, filed a lawsuit against Musk and Tesla, alleging Musk sent his “funding secured” tweet to harm short sellers like him.
The filing called Musk’s statements about potentially taking Tesla private “an ill-conceived attempt to artificially manipulate the price of Tesla securities in order to ‘burn’ and ‘squeeze out’ the Company’s short-sellers.”
Tesla did not immediately respond to a request for comment.
September 18: Bloomberg reports that the Department of Justice has opened a criminal investigation into Tesla.
Citing two people familiar with the matter, Bloomberg reported that Tesla was facing a criminal investigation by the US Attorney’s Office for the Northern District of California over Musk’s statements about taking Tesla private.
A Tesla representative said the company had received and cooperated with a voluntary request for documents from the Department of Justice but had not received a subpoena.
According to Bloomberg, the investigation was opened in August after Musk’s “funding secured” tweet. The investigation is in an early stage, one source told the news outlet, and criminal probes do not necessarily lead to enforcement actions.
September 27: The SEC sues Musk.
The SEC filed a lawsuit against Musk on Thursday, alleging that Musk made “false and misleading statements” in August about the possibility of taking the automaker private. The agency said it sought to bar Musk from being an officer or director of a public company.
The SEC alleges that Musk said a representative from Saudi Arabia’s Public Investment Fund had shown interest in taking Tesla private but that Musk had never discussed any of the specific terms he described on Twitter with the Saudi fund or any other potential backers before making them public. According to the SEC, those terms included the proposed $US420 share price and an option for all existing Tesla shareholders to remain with the company after it went private.
Musk said he was “deeply saddened and disappointed” by the lawsuit, which he described in a statement to Business Insider as “unjustified.”
September 30: The SEC settles with Musk.
The SEC reached a settlement with Musk on September 30. Under its terms, Musk doesn’t admit or deny the allegations in the agency’s lawsuit but will step down as the chairman of Tesla’s board of directors for three years and pay a $US20 million fine.
According to the SEC, Tesla must create a committee of independent directors and “put in place additional controls and procedures to oversee Musk’s communications,” including on platforms like Twitter.
Several news outlets reported that the agency sued after Musk rejected a settlement under which he would have had to step down as chairman for two years, add two independent directors to the company’s board, and pay a $US10 million fine.
October 4: Musk mocks the SEC on Twitter.
Musk seemed to take aim at the SEC in a tweet on Thursday, calling it the “Shortseller Enrichment Commission.”
“Just want to that the Shortseller Enrichment Commission is doing incredible work,” he said. “And the name change is so on point!”
The SEC declined Business Insider’s request for comment. Tesla did not respond to a request for comment on what Musk meant by the tweet.
About 40 minutes after his initial tweet, Musk published another in which he addressed a typo in that tweet and appeared to target the SEC again.
“Sorry about the typo. That was unforgivable,”he said. “Why would they be upset about their mission? It’s what they do.”