Elon Musk is still seeking funding to take Tesla private, says report

This week, Elon Musk shocked markets with an unexpected plan to take Tesla private, removing all shares from public markets at an estimated cost of at least $50 billion. But while Musk claimed that funding for the move had already been secured, unnamed sources in a recent Bloomberg report say Tesla is still working to line up financial support from a variety of different sources.

According to the report, Tesla is currently seeking funding from a broad pool of investors, in part to avoid a concentration of ownership. Discussions are still in the early stages, and include fundamental questions about how the deal and resulting holdings will be structured. Additionally, Bloomberg spoke to individuals close to 16 financial and tech institutions who were not aware of any pre-arranged funding. Reached by The Verge, Tesla declined to comment.

The report casts new doubts on Musk’s initial description of the plan, which boasted “funding secured.” If that description proves to be inaccurate, Musk could face both civil and criminal penalties for securities fraud. Tesla’s stock shot up 10 percent in response to the announcement, and the Securities and Exchange Commission has already made inquiries into whether Musk’s announcement was misleading, although there’s no evidence that a formal enforcement action has been launched.

Musk explained his logic for taking the company private in a blog post on Tuesday, saying exposure to public markets makes the company vulnerable to short-term demands and bad-faith investments. “As the most shorted stock in the history of the stock market,” Musk wrote, “being public means that there are large numbers of people who have the incentive to attack the company.” Many of those short positions have been significantly weakened by Tesla’s recent stock gains.

Still, Musk has maintained that all the necessary investment for the buyout is in place. “Investor support is confirmed,” he tweeted shortly after Tuesday’s post. “Only reason why this is not certain is that it’s contingent on a shareholder vote.”

Comments

If it was just a verbal commitment from somebody, would it still be securities fraud?

Elon’s reputation is definitely on the line here.

Of course it would. Verbal commitments have no legal standing. Nobody is legally required to put up millions of dollars just because they said they would. It has to be in writing.

So for Musk to say that funding is "secured", it has to really be secured.

A statement of intent (on behalf of whatever source(s) of funding Tesla has) would be legally binding, secured, and in writing.

Quick Google search found this:

Verbal agreements are contracts even though they were not memorialized in a writing. Assuming that the contract is valid, the verbal agreement between two parties is binding. However, verbal contracts may have unique complications to them.

https://www.hg.org/legal-articles/are-verbal-agreements-binding-35794

Securities laws are different. Unless it’s written down, it means nothing.

They’re not. SEC filings require a written agreement, but no filings have been made.

You don’t know what the hell you’re talking about. it’s not fraud if he had a verbal commitment from entities willing and able to front the money.

It’s possible he’ll get a slap on the wrist from the SEC. The talk of lawsuits of a material amount is a bunch of crap as well. He has no fiduciary duty to shorts and someone would have to prove economic harm.

The talk now is he does have a firm commitment but he’s worried about losing control.

If he was worried about losing control then he was still bound by the law to keep it under wraps, because what he did is manipulate the stock price with his tweet. The SEC has rules about social media; what Elon did, if he didn’t have a deal ready to go, was against the law.

A slap on the wrist? The SEC doesn’t take this sort of thing lightly. It can bar him from serving as a director or officer of a public company, Tesla included.

The SEC takes this sort of thing lying down all the time.

This isn’t true in contract law; a witnessed promise of funding could be considered a binding agreement under those laws.

According to the report, the only reason they’re currently seeking funding is to reduce ownership control from new investors:

Tesla Inc. Chief Executive Officer Elon Musk and advisers are seeking a wide pool of investors to back a potential take-private of the automaker to avoid concentrating ownership among a few new large holders, according to people familiar with the matter.

Tesla is holding early discussions with banks about the feasibility and structure of a possible deal, the people said, asking not to be identified as the details aren’t public. They are canvassing investors including large asset managers, the people said.

Billionaire founder Musk would prefer to amass a group of investors who could each contribute part of the funds because he wants to avoid having one or two large new stakeholders in the company, the people said. Deliberations are at an early stage and the company hasn’t yet formally hired a bank to work on the process or made a final decision on how to proceed, they said.

This is especially obvious with the use of words "prefer" and "avoid". There’s a fallback option in place, which is what was meant by "funding secured" but they’re looking for a better deal. After all, who doesn’t do this when making a large purchase such as a car?

Thats not what funding secured means

God you Tesla fanboys are so far up Elon’s ass…

The ripe ones are found on Twitter. It’s hilarious how delusional those fanboys are, especially the ones who keep calling Elon their God under every tweet.

How many thousands did you lose shorting?

I think he has a deal in hand but wants to democratize as much as possible. This mirrors his Open AI ethos.

Why? Most likely this would drastically reduce the number of shareholders.

Given his track record I’d say it’s looking like a weed joke that got away from him.

Any word on who the funding was secured from? Last I heard it wasn’t any of the usual suspects.

"Funding Secured"….. NOT!

Yep, that’s exactly what he meant to say, but didn’t because he mispoke…

Musk was going to correct his tweet, but heard that "Timmy fell down a well" from Lassie and immediately dropped everything to use his superior intellect to invent and build a submarine to save Timmy.

Hehehe… Classic.
Solid Burn.

if he committed fraud i hope he sees jail time.

You hope in vain. They rarely punish their peers. It doesn’t get much clearer than this:

=> Intel’s CEO reportedly sold shares after the company already knew about massive security flaws

… and the dishonest rich white man still got to bag the loot.

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