"Funding Secured" Means the Saudis Want In: the Tesla Buyout May be the Largest in History
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The high stakes corporate drama of whether Tesla Corporation will survive its severe cash burn, whether its CEO Elon Musk will be able to take the company off the NASDAQ public listing and make it a private Inc. or LLC, whether is “funding secured” for such a transaction and if that is true, who will do the funding, took a dramatic turn when it was finally revealed the official sovereign wealth fund of the Saudi Arabian government may be in consideration of increasing its barely 5% stake in the company. But the news blindsided everyone including the company’s board, NASDAQ, and regulators:
- -CEO Musk is looking to get rid of the “shorts” criticism by Tesla going private.
- -Taking Tesla private frees up management from certain restricting regulations
- -Musk needs anywhere from $24 billion USD, his price, up to $80 billion USD experts’ price, and a high market stock price for this to fly.
- -Through tweets he’s promising stockholders a $420/share price if they want out.
- -Few key players have enough funds for this, at first all denied then one finally was revealed, namely the Saudis.
- -The tweeting may have violated rules from the SEC to NASDAQ, issues unethical or illegal, and the SEC begins “inquiry” for clarification.
- -The Saudis with a charismatic young crown prince is looking to change its image and look for new ways to invest his country’s wealth in other parts of the world as he woos and courts the West.
- -A private Tesla will take the pressure off debt issues, gets rid of the “shorts,” and make new projects go faster and more smoothly like upcoming Model Y and Model Pickup in your garage!
Am considering taking Tesla private at $420. Funding secured.
— Elon Musk (@elonmusk) August 7, 2018
The blindsided bombshell of the year was dropped in a Tweet recently when without even consulting his board of directors, Tesla CEO Elon Musk announced on Twitter his intentions to take the controversial renewable energy and sole purpose battery electric car company off the public NASDAQ listing for private management in an equity leveraged buyout. Most circumstances this probably would get a CEO terminated by a board. In Tesla fashion, it convened a board of director’s oversight committee, and intensified the stakes. Stock prices for Tesla have since been on a roller coaster with no definitive gain or loss in market value as it stays around $350-380+-/share.
But in the process of tweeting Musk may have violated all kinds of rules. From NASDAQ: it requires companies listed to inform the exchange’s market surveillance group at least 10 minutes before making a company announcement that might drastically affect the market. That wasn’t done. At one point because of volatility NASDAQ had to suspend trading of Tesla shares shortly after tweet-gate. Tesla was only able to recover with only a half hour left of trading at the end of the day after it issued a statement by Musk to employees. To the SEC: it requires that if you intend to take your publicly traded company private, you must file papers with them, usually a 200 page document. That wasn’t done either until at least it was announced the following week, perhaps it was done earlier. Regardless, it all went south from there.
For unknown reasons that remain a mystery, the Tesla organization, including Musk, the board, and its media relations apparatus, went silent for almost a week after the board that Wednesday in a statement acknowledged Musk’s proposal and then said nothing, probably under legal advisement. Then after a whole weekend a following Monday saw a statement by Musk on Tesla’s blog on their website about the recently announced corporate plans. Obviously backpedaling and explaining his intentions, he clarified with obviously some legal help in a carefully worded statement that intentionally left out key information, some of the many more issues he inadvertently raised with the information he spontaneously and impulsively intended to initially relay.
To keep him in compliance of the law, Musk stated that the 200 page SEC filing document was prepared. He called a meeting of the board, two meetings actually, the first one held without Musk family members present, the next one with Elon and brother Kimbal present. The board directed him to query the largest investors and see how they feel about a privatization deal. He named Silver Lake Partners, whom he’s had a long history and work relationship with, and Goldman Sachs as financial advisers, and Wachtell, Lipton, Rosen & Katz and Munger, Tolles & Olson as legal advisers. He’s already going to need the legal teams. Two shareholder entities have filed suit in Federal District Court in San Francisco, requesting class action status against the company and Musk for manipulating stock prices during the tweet crisis. People have already lost money on their stocks over Privatization Tweet-gate and they’re demanding answers and action.
While the board was instituting damage control by self appointing an oversight board over Musk with full board powers, discretion, veto, and overrule powers, a shroud of mystery was uncovered when Musk identified the sovereign wealth fund for the Saudi Arabian government, known as Saudi Arabia’s Public Investment Fund (PIF), as the major interested party in taking a major stake in Tesla Corporation to help it go off public listing to be a private company. It was the Saudis after all.
If the Saudis increase their investment this would not only enable Tesla CEO Elon Musk to take the company private, but it may also give the Saudis a larger controlling interest in Tesla. And with that, it would give Tesla lots of options and avenues it hasn’t had in a while, or at all, as to how to move business forward. There are many advantages and drawbacks to privatization that will be discussed in this report, but the bottom line is that if Tesla were able to go private, Tesla’s debt issue would be less of an issue, they wouldn’t have to worry about meeting short term earnings goals that they feel is a hindrance to them as a public company, and the company can focus keenly on the next upcoming money making projects to have them run more quickly and efficiently, like Model Y and Model Pickup. This is the line of thinking, based on Musk’s recent tweets and statement.
Who Else Can Take Tesla Private?
Besides the Saudis, since there are not too many people or entities in the world that can fund a $24-80 billion private corporate turnover conversion, there were few people and places on Earth to look under a rock and ask if they are participating. If they can’t do it alone the big financial consortiums like Citibank, Chase Manhattan, Deutche Bank, Soft Bank, Bank of America, etc. and some of the major wealth funds they run, would have to pull resources together to make this happen. So if one bank or fund knew and didn’t have enough they’d let the others in.
Then there are the countries with such wealth that money is not an object. If you include the other Gulf States, according to a report by Wired, those include investors in Saudi Arabia, China, and Japan, with China the likely front-runner due to its plans to require 10 percent of all automobile sales next year be battery-powered vehicles. Although there is more competition to Tesla in China than there is here in the states or in Europe or the rest of Asia, the logical progression would be China would flag the money first, more than Saudi Arabia or her sister Gulf States, as China has more at stake with green technology than the OPEC nations.
And finally, there are the specific people who have this kind of cash. According to Forbes, there are 2,208 billionaires in the world holding on to about $9.1 trillion USD worth of wealth, of which Mr. Musk is one of them with a net worth of around $19 billion USD. Of these, there are just 20 people holding on to $1.2 trillion USD alone. That is the equivalent to Mexico’s yearly GDP output. Of all these people, surely Mr. Musk can rely on any few in that exclusive club of his fellow Silicone Valley buddy billionairesfor the money, as they do tend to help each other when the occasion calls for it. Between Amazon’s Jeff Bezos at $112 billion USD and say, Larry Page of Google, the two combined are worth over $160 billion to start there.
Just about everyone or their spokesmen of the very few countries, entities, or people said either they were not asked, or they were not even told of Tesla’s desire, which raised eyebrows in all corners of the Earth, from the financial sector to media circles, to wonder what was going on. Although they have not launched an official investigation, the Securities Exchange Commission did launch an inquiry to find out what is going on, and what Mr. Musk’s intentions are.
Mr. Musk needs for his company’s stock price to remain high in order for this deal to have any chance of succeeding. Currently Tesla stock is trading anywhere lately from $350-$372/share. He is looking to take his company private in a stockholder buyout at his tweeted price of $420 per share, somewhere around a 16% premium. This does not include Musk’s 20% stake. That price will require a leveraged buyout for stockholders at $60-80 billion USD. The Street is saying,however, Musk’s projections for equity are correct, if 2/3 of the shareholders stay they’ll need only $24 billion, USD for the deal to go through. If this is the case, it will be the largest leveraged buyout of a corporation in world history. In his statement he did make it a point of mentioning that this buyout will be against equity, not debt, as obviously with the about $11 billion USD of total debt and rapidly counting Tesla already has, there’s no need to pile on more.
Speaking of debt, another reason for the high stock price is because two key bond payments are coming up, and Tesla might not be able to make one of them with just cash alone. So there is a time is of the essence element to a buyout deal: if the Tesla stock price remains high they might be able to pay off the debt with stocks as opposed to cash. But if the stock price tanks, then Tesla is in serious trouble as the terms require interest payments to be at a determined market price in order to have a stock conversion payment. The first payment is a light one at $230 million USD due this November 18th. The next one is staggering to wonder if they can possibly pull it off: $920 million USD, that’s almost a billion dollars due March 3, 2019. A third one is $566 million USD due November 19, 2019. Running a car company requires a large amount of capital layout for machinery, and materials to build. They need billions so the can replenish, retool, and continue current and new production. The last thing they need is to start paying large amount of debt. Something has to give otherwise.
In Come the Saudis
Given the recent realities of the unstable oil markets with producers having different agendas, and oil customers entrenching themselves in renewable energies, it seems that the Saudi government is looking beyond petroleum toward the future of energy itself, by contemplating whether to further its investment in the world’s largest renewable energy and sole purposed battery electric car company. The Saudis, according to Bloomberg News, at first said they were not participating in any talks with Tesla, as they had already made a $45 billion investment in Softbank, one of the key players with funds to finance such a deal for Tesla. But Softbank has already financed General Motors’ Cruise, their autonomous AI arm, considered one of Tesla’s rivals. But this was apparently before PIF had a chance to communicate with Softbank about their positions in either deal. Apparently the discussion was eventually had. The Saudis are apparently ready to talk a deal with Tesla.
Bloomberg said most especially after Musk’s tweets stating his intentions and how he was going to go about doing this, which some considered a sloppy way of conducting an SEC supervised corporate transaction with possible ethical and criminal consequences, nobody involved in these talks now wants to comment, and no one made it clear how much PIF wants to invest. Because of the tweets, the SEC wants to know if and/or what part of those tweets were false, misleading, or some kind of attempt to manipulate Tesla’s stock price.
Because of the way Musk went about tweeting the announcement, some didn’t even take it seriously, as the proposed price was nicknamed the “weed number,” 420, as in marijuana. And because some of his story couldn’t be verified, was muddled in secrecy, executed poorly, and couldn’t be fact checked, some thought he secured only part of the funding in actuality, or one of the financing partners backed out of the deal when the weekend scrutiny intensified, or he was manipulating the process in order to get a better deal. All of this can now have serious consequences if the key players, including the board of directors at Tesla, are not careful.
This is why the Tesla Board of Directors appointed three of themselves as a committee to review, and given Mr. Musk’s recent statements and conduct, actually to now supervise Mr. Musk’s privatization process moving forward, and to go off and find other avenues if privatization is the best course for Tesla.
How Much Will It Cost for Tesla to go Private?
Just the amount alone is the subject of much contention as financial experts debate the costs entailed. Estimates have been anywhere from $60 billion USD to $80 billion USD. According to the Street: “Musk estimates that two-thirds of all investors in Tesla stock would stick with the company in a privatization deal. Assuming we're talking about just one-third of the stock then, that's about $24 billion at Musk's buyout price.”
Why is Elon Musk Doing This?
When you are running a car company, it’s almost like running a US state or the whole country: officers of the government are bound by law to perform certain duties, and the citizenry either vote and/or scrupulize. Periodically corporate officers of public companies are bound by law to perform such duties as “the earnings call” where they must make themselves available to either the media or investors to answer questions about their business practices, and earnings for the quarter and year. There are also investors’ meetings, like the annual shareholders meetings where they are held accountable. Because a public company trades its shares of stock on a public listing like the New York or London or Hong Kong Stock Exchange, or NASDAQ, that means ownership is publicly traded, and the public can chime in about anything about the company because its books are open to the public. Everyone has an opinion on everything about running it, especially when it’s a public company, and about cars, and the CEO, the board of directors and its chairman, are bound by law to certain regulations and accountability to the public for running that company.
Having a company go private frees up a lot of those regulations to tamp down criticism and decent. Some say unlike GM that was publicly excoriated (“Government Motors”) when it filed for its 2009 bankruptcy, this is how Chrysler was able to handle its 2009 bankruptcy as it avoided a lot of criticism as it was then a private company owned by a capital investment firm.
Some Tesla Background and Auto History
The electric car is a counterintuitive product in the current legacy auto industry. The auto industry as we now know it was formed and based upon the merging of both Karl Benz’ and Gotleib Daimler’s engineering visions of a stroked internal combustion engine sitting in/on over the ensuing decades, either a modern chassis or mono shell frame, quadicycle, or horseless buggy platform that propels the vehicle. Combine this with Henry Ford’s industrial manufacturing principles applied to gas motor car building, and there we have the industry as we see it today.
Battery electric car companies at the time 100 years ago worked on completely different sets of engineering principles and a completely different business model, but with the gas motor car companies, both were in direct competition with each other. This competition intensified over the 35 years the electrics were in business competing with gas car companies, but suddenly in the 1920s the BEV industry collapsed and disappeared, and gas car companies dominated the rest of the 20th century.
At 2003 just past the turn of the century, here comes Tesla. At first Tesla was going to make hybrid vehicles, but when Elon Musk came onboard after the company was just formed, that changed to making sole rechargeable battery electric vehicles. Purchasing gliders (assembled cars with no guts) from Lotus, their first car in 2008 was the Roadster I to which they installed a BEV Tesla Powertrain, in 2010 was their IPO, and they introduced their full BEV production car, the Model S in 2012. The rest is history to Model 3.
Tesla’s ethos is to build electric cars and once interest generates, to get the industry to start building electric cars as well, something none of the legacy automakers wanted to do at first when Tesla came to existence. The technology was expensive and underdeveloped, the cars would be too expensive, infrastructure made them impractical, while they’re zero emissions, some of the energy sources from which they recharge, are not. The dealers certainly don’t want them because there’s less to break down so less money to make off of them. They prefer hybrids because there’s two propulsion systems in the car which means twice the issues and twice the money to pay for things to break down. Some companies with a non-electric counter-inducive culture are like FCA Chrysler, that when they revealed their 5 year plan recently at an investor’s meeting in Italy with a current car line up of only a minivan as their only hybrid and 1 BEV, both compliance cars, some investors wondered if FCA had any enthused interest in making an electric car at all. Some like GM experimented with them over the years, the last project pre-Volt and Bolt was the EV1 which controversially ended in 2003, and some say, when the Tesla founders decided to form their company as a response.
Now worth about $29 billion and some 360,000 total cars made since the beginning of their first production year in 2008 thus far, its CEO Elon Musk wants to take the company back to being a private corporation, either Inc. or LLC. By being a private company Tesla will be able to streamline their decision making processes. Bogged down with government regulations that require corporate governance to be handled certain ways, the company would be free in making decisions like dividend disbursements, financing, meeting quarterly projections, capital investment, etc., without doing things, like filing SEC papers. They will no longer be held accountable to many federal and state laws when they were public. No more things like earnings calls, short term earnings goals, and criticism from the “shorts,” that is investors who leveraged against the company and lost money.
Some of the shorts are not invested in Tesla, but for some reason either do not like electric cars, do not like the idea of climate change to be critical of the evidence, do not like Elon Musk, or do not like Tesla. Some are actually critical of Tesla not because they do not like any of the above, but rather the persons responsible are doing a horrible job executing the company’s business model. Regardless of motives, over the years they have become either organized, influential, relentless, and/or vocal over their objections to many things Tesla, whether justified or not. Privatizing Tesla, proponents say, will marginalize if not outright neutralize “the shorts.”
While a private Tesla will hand accountability over to fewer people or entities that will make the board of directors, its chair, and the CEO and senior officers of the company even more beholden to the private shareholders with more efficient fire to their feet, there are drawbacks. All matters involving the company become private. Transparency is something that’s hard to do with a private company. Officers will always be accused of hiding things from the public. And because of the privacy, the temptation to do corrupt things either to the company, customers, investors, employees, or even the public increases because you’re operating behind closed doors. Whistleblowers find it harder to whistle at private entities. Tesla is already having labor and work place safety issues as a public company that are recurring, a private dynamic will further erode public trust and confidence of an eco conscious Tesla owner, that they probably won’t tolerate hostile work environments for the working people who make their cars. Misconduct can more easily run amok at private companies. Uber is an example. Since its formation some say it adopted a culture that made it difficult for women to flourish, if not make it through the day without incident. According to Uber they plan an IPO at least next year.
Why the Saudis?
The Saudis are no dummies. Unlike other oil producing entities that double down on the politics of climate change, the Saudis have realized for decades that the world’s petroleum reserves are not going to last forever. Their eyes are wide open to both the politics, the science, the economies, the diplomacy, and the just plain realities that nothing lasts forever, especially with oil. Geologist say there’s less than 100 years left of consumption at the peak of consumption rates of the late 20th century. Although demand continues to exceed output, experts are expecting to finally see a peak of consumer demand sometime in this century, that’s cause for OPEC concern. Consumer entities or nations like the United States, particularly after September 11th, grew sick and tired of Middle East instability, and tuned up their own faucets of production within their borders, in the case of the US to become the largest petroleum producer in the world to now export some of its own homemade oil.
The Saudis also observe that the West is becoming more aggressive in its infrastructure growth of renewable energy. And finally, with China, there goes the rest of the world: China has doubled down on auto electrification that because of China, the electric vehicle market is now too tempting to resist, or hard to ignore. But as the oil will dry out no matter who has the rest of it, and most likely that will ironically be the Saudis with them having the largest reserves, they are keenly aware that the market will become extremely unstable to rely as a steady income source when it dwindles down. They’re preparing themselves for this, and some may say, preparing to help the world to look elsewhere for energy needs.
Over the years the Emirates of the Gulf States and the Arabian Kingdom have invested themselves in things like global real estate and global financial services. When the oil era is over, they intend to become the world bankers and real estate developer moguls as they grow their wealth funds and invest in other parts of the world and theirs. Some of this is also about image perception. The Saudis and the West, particularly the United States, have a very complicated relationship. They are keenly aware of the collateral damage caused by September 11th to never forget that. Each side genuinely tries hard, perhaps at times one side more than the other, to try to understand the other. The Gulf Emirs and the Arabian King send key princes to internships, colleges, and military academies in Europe and the US to understand western thinking. What better way of showing the world you care about the climate and its future, short of philanthropy, by having oil barons investing in a new up and coming electric car renewable energy company?
Some of this is also about Saudi leadership. His Majesty King Salman’s son, the Crown Prince Mohammed bin Salman, is heir apparent, 32 years old, and is described as quite charismatic, handsome, and charming. As #2 in charge of the country including its defense minister, and a close confidant of the King, he is in the process of transforming a country that’s been in its present existence for 2,000 years, to now initiate reforms for women, religion, education, governance, and infrastructure, including building a whole new from the ground up city. But Saudi human rights treatment remains an issue.
Buying a controlling stake in an electric car company sends a message to the world that the Arab oil states have much to be concerned about the environment as the oil consumer states. By jumping on the green tech bandwagon by turning consumer demand away from cars using oil, the Saudis actually help conserve their resource commodity so that more of it will be available for the future. More in the future means more energy options will be available, and for more things that have a higher priority to use oil than cars do, like the home heating oil and the aviation industries, until energy technologies improve for those industries as well. They are also investing a lot of money in their petrochemicals industry. With oil used less as an energy source and conserved, it can now be available to be used in more applications like plastics. With less demand perhaps the oil markets will become more stable, and with a prolonged resource commodity, prices will go higher as it becomes rare and for a longer period. Oil tomorrow will be more worth more and cost more than it is today.
So even though the Saudis are already invested in Softbank and General Motors’ Cruise, they may be looking for further avenues of green technology to show they are invested and care. Tesla is a showcase way of showing the West and showing the world they too want to become invested in our eco future.
Who Can Stop This?
There are several ways a monkey wrench can be thrown into this assembly line, or outright kill the entire deal for good. First the monkey wrenches.
1. Amount of Money Required: Musk is assuming that at least two thirds of the shareholders love Tesla so much, they couldn’t resist staying on with a private company they’d continue being owners of, and hold onto their position, for Tesla to pay nothing. That’s a very rosy best case scenario, typical Elon, but we know better. But at a $420/share buyout offer, for most investors, including the ones who held on since the IPO, not only is that a tempting price, but for the things Tesla faces that a buyout probably will help, but still not guarantee survival to see them go belly up which includes their solvency issues, $420 is a great parachute cut and run price. From the Street: “And at that premium, it wouldn't be unreasonable for many shareholders to take their earnings and bail -- forcing Tesla to scarce up billions upon billions in capital to shore up the outstanding shares.” So it should be safe to say like it was when many people asked for their $1,000 Model 3 waitlist refund after certainty a $35,000 base car won’t appear anytime soon for that waitlist to finally blow up, the waitlist for buyout checks is going to be bigger than Musk believes.
2. Tesla Board of Directors and Privatization Committee: Another monkey wrench could be the board. The board’s self appointed three member committee has the potential of becoming a thorn in Musk’s side, but he hasn’t anyone else to blame. The committee said its purpose is to review Musk’s proposals moving forward, in actuality it seems the dynamic is more like supervision, given what he’s presented to the public recently with inappropriate comments and erratic behavior. The three independent directors who make up the special committee, Brad Buss, Robyn Denholm and Linda Johnson Rice, “have the full power and authority” of the board to evaluate and negotiate any potential transaction to take Tesla private, the company said. According to the New York Times, the company stressed Tuesday that “no assurances can be given” that any proposal from Mr. Musk would be accepted. That means whatever he wants is subject to the board’s approval. So they can say no to the $421, no to the Saudis, and no to anything else about the deal. But that doesn’t necessarily mean that they’re going to say no to the ENTIRE deal.
The potential deal killers are being played off as being on board with the proposal. To the contrary, if you pay closer attention, you can see at least skepticism if not caution or doubt. Let’s go to the potential deal killers:
Investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote. https://t.co/bIH4Td5fED
— Elon Musk (@elonmusk) August 7, 2018
1. Tesla Stockholders: In a vote they can simply turn down the proposal. Case closed, end of story, Tesla soldiers on publicly with $11 billion in debt, and the Tent drama continues. But there’s no appealing this decision. Unless laws were broken or there is an obvious tort, this doesn’t go a lawsuit to court, sue for what? Elon can at a later time restructure another privatization package with the weaknesses of the present one removed that caused the rejection, and try another day. And he’d be wise to wait, because one of the reasons it could be rejected may have less to do with price or the Saudis, and might be more about him if he’s not careful, which he hasn’t been lately.
2. Tesla Board Members: Before a stockholder vote is even taken, a shareholders meeting town hall style would be all that it takes to check the pulse of the deal, and if the board members are feeling flatline from the stockholders, a board vote can do the shareholders a favor to deem it DOA. Elon and Kimbal have a vote each. Elon can at a later time restructure another privatization package with the weaknesses of the present one removed that caused the rejection, and try another day. And he’d be wise to wait, because one of the reasons it could be rejected may have less to do with price or the Saudis, and might be more about him if he’s not careful, which he hasn’t been lately.
3. Justice Department/State Attorney General: There would have to be some criminality for this to happen. But one bad criminal sniff a US Attorney or a State’s Attorneys General could put a halt to it and convene a grand jury. If there was still a will afterwards it’d have to start all over and fresh with new faces and players, with possibly a new CEO regardless of implications.
4. Securities and Exchange Commission: Same premise as #3 but with regulatory issues. Most likely there would be a warning before action so that correction is taken. But they can say no if they want to if they have good reason. The legal team would then go to Federal Court to show cause and seek relief.
5. The Committee on Foreign Investment in the United States: This is the one that should concern the privatizers (or privateers?), and with the debut of the Saudis, so too the CFIUS makes its debut in Privatization Tweet-gate. The CFIUS started by executive order under President Ford and during the GW Bush Administration became law by his signature enacted by Congress. President Trump is expected to sign the Foreign Investment Risk Review Modernization Act, or FIRRMA, new legislation designed to broaden CFIUS' authority, and he has already said no to some deals that have national security issues, like the proposed now cancelled merger between US’s Qualcomm and Singapore’s Broadcom. 6 Cabinet Secretaries and the Attorney General including the Director of National Intelligence sit on this committee. The Secretary of the Treasury is the chair. The governing enforcement power is the President of the United States, who has appointed all the members, and whom the Committee reports to, as Congress has given him the authority to cancel, revoke, divest, sanction, terminate, break up, order, or do whatever is necessary to prevent a foreign interest from investing themselves in an American entity that might jeopardize or compromise or conflict with national security.
Tesla’s patents on battery technology are cutting edge, it has an infrastructure in place that’s a company advantage and industry edge, that its sole job is to go around the world and find new technology to see how quickly they can adapt it into the assembly process. And Tesla doesn’t wait for a next generation model like the legacies do, they do it ASAP, as in the next car on the assembly line. Their recent announcement about their new light weight cheaper battery pack is a game changer as to why most likely there will finally be a base $35,000 Model 3, and sooner, with an even longer range than originally planned. Obviously battery technology is something that can always be useful in defense applications.
The problem is, Tesla is America’s only viable proven producing battery electric car company in the United States, and yes in the world, for now. We all criticize Tesla too often to forget where it came from, where it’s been, and where it is today. Unless another electric startup gets its act together to start producing a vehicle and sustain itself, Tesla is the only one like itself in the world. And she’s an American (run by a now naturalized US citizen immigrant who was once a foreign national, mind you). Until another American BEV car company is born to stay alive and catches up, or until one of the other legacy car companies catches up with Tesla’s model range and technology, and most likely that would be GM, Tesla is in a unique situation of being truly all-electric and uniquely all-American as a car company. And the risk of a foreign national taking away Tesla’s patents or technology infrastructure that gives it its edge against competition, foreign or domestic, for whatever reason might be too great the risk.
From CNBC: "I think that in terms of FIRRMA's intent to capture transactions in areas deemed 'critical technology,' electric vehicles may fall into that," said David Ribner, an attorney with O'Melveny & Myers whose practice focuses on advising clients seeking CFIUS approvals of foreign investments. "It's an open question about how investments by the Saudis would be treated. Every national security review looks at both the threat posed by the foreign person and the U.S. business's vulnerability."
There could be a plausible scenario in which the committee could tell Tesla either no to privatization, no or less participation to the Saudis investment specifically, or not now, wait until the market catches up when they’ll be a rival American BEV peer in the market when it comes to electric vehicles that you won’t be the sole keeper anymore. As complicated as our relationship is with the Saudis, the Saudis wanting to invest themselves in Tesla is a noble cause, but some say the timing couldn’t be worse.
Final Thoughts and Lessons to be Learned
When Musk tweeted his intention of privatization, there was a large internet following that was starting to contemplate that perhaps the eccentric techie billionaire we at times try so hard to find reasons to love, was either off his rocker or his account had been hacked. Like another famous chief executive we all know that we’ve become almost immune to the bombastic-ness of his tweets, we all knew that Elon was Elon, and tweeting is his favorite way of keeping in touch with his fan base, like the other guy in Washington with his.
But in this case, it was the suddenness, the impulsivity, the extemporaneousness, and for some reason it caught everyone by surprise. Some thought the $420/share price, “the weed number,” was the giveaway that the account was hacked. But ironically, it turned out to be Elon after all, which made sense, because there was the same aspect of impulsivity, unplanned, unorganized surprise that he’s famous for, from tents to tweets.
But this should serve as a warning that probably Musk or other CEOs or VIPs like him, like that elected official in Washington who likes to Tweet, still won’t heed: This is the nice way of putting it: “To everything there is a season and a time to every purpose under heaven.” Thank goodness nobody was injured or died as a result of this. The market jolted and Tesla stock made like a yo-yo, but the markets didn’t collapse. People lost a lot of money and are in the process of redressing that, but nobody lost a fortune or their hard earned life savings over these tweets, that we know of. But it could have been worse. And somebody could have gotten hurt in someway, even it was about just starting with losing money. Not everyone invested in the stock market is rich, we have to remember that, that rich and poor tend to forget. People’s lives may hang in the balance with tweets like that. Let’s be more careful.
There is a time and a place for social media. Care needs to be exercised when corporate or government decisions are announced on them:
“As an officer of a public company that was clearly a market-moving event and he knew or should have known that,” said Laura Unger, a former S.E.C. commissioner, to the New York Times, of Mr. Musk’s initial tweet. “He was at least reckless whether he meant to drive up the price or not. What it does point out is that executives and people in power should be thoughtful about what they tweet. The stakes are high.”