Last week, Elon Musk's lead lawyer, Alex Spiro, in a court filing in a lawsuit against Musk and the SEC, first disclosed text message interactions between Musk and Yasir Al-Rumayyan, head of Saudi Sovereign Wealth Fund (PIF), during the 2018 Tesla privatization incident.
Combined with the information that has been made public before, and the text message conversation between the old horse and Yasser, let's take a full look back at what happened at that time. If you can understand the idea of Privatizing Tesla at that time, it will be very helpful to understand why Lao Ma privatized Twitter at the moment.
Elon's blog post comes from Tesla's English official website, Mu Toujie's open letter comes from the Ark Investment official website, and the *latest disclosure* SMS conversation comes from the content compiled by the Twitter account "Internal Tech Emails" (I understand it to be part of the court documents). Translation: Gravel Villager. The number of texts in this text is about 7,000.
The following times are 2018, local time in the United States.
Tuesday, August 7
In the morning, the old horse tweeted, "I am considering taking Tesla private for 420 knives." Funds are protected. ”
Later, Lao Ma sent an email to Tesla employees "privatizing Tesla" and posted the content of the email on the company's official website blog.
https://www.tesla.com/en_GB/blog/taking-tesla-private
Privatize Tesla
August 7, 2018
The following email was sent to Tesla employees today
Earlier today, I announced that I was considering taking Tesla private at $420 per share. I want you to know why I'm doing this and why I think it's the best path forward.
First of all, the final decision has not yet been made, but the reason for doing so is entirely to create an optimal operating environment for Tesla. As a public company, our stock price fluctuates wildly, which is a big distraction for everyone who works at Tesla, and everyone here is a shareholder. As a public company, we are also affected by the quarterly earnings cycle, which puts tremendous pressure on Tesla to make decisions that may be correct for a certain quarter, but not necessarily correct in the long run. Finally, as the most shorted stock in the history of the stock market, staying public means that there is an incentive for a large number of people to attack the company.
I fundamentally believe that we are at our best when everyone is focused on execution, when we are able to maintain a focus on our long-term mission, when there are no people with ill-motivations trying to compromise what we are all trying to achieve.
This is especially true for a company like Tesla with a long-term, forward-looking mission. SpaceX is a perfect example: it operates much more efficiently, largely thanks to the fact that it is privately held. That's not to say that it makes sense to keep Tesla private for the long term. In the future, once Tesla enters a phase of slower and more predictable growth, it is likely to make sense to return to the public market.
Here's what I envision, what privatization means for all shareholders, including all of our employees.
First, I want to structure all shareholders with a choice. Either they can remain investors in the post-privatized Tesla, or they can be acquired for $420 per share, which is 20% higher than our share price after the second-quarter earnings call ( which has risen 16%) . I hope all shareholders will be able to stay, but if they prefer to be acquired, then that will make the acquisition come to fruition at a decent premium.
Second, my intention is for all Tesla employees to continue to be shareholders in the company, as in the case of SpaceX. If we go private, employees will still be able to sell their shares on a regular basis and exercise their options. This will allow you to still share the growing value of the company you have worked so hard to create over time.
Third, our goal is not to merge SpaceX and Tesla. They will continue to have independent ownership and governance structures. However, the structure envisioned for Tesla is similar to that of SpaceX in many ways: outside shareholders and employee shareholders have the opportunity to sell or buy shares about every six months.
In the end, it has nothing to do with the fact that I'm accumulating control for myself. I now own about 20% of the company, and I don't think that's going to be very different after any transaction closes.
Basically, I'm trying to achieve an outcome that allows Tesla to operate at its best, as undisturbed as possible, unaffected by short-term thinking, and as minimally changeable as possible for all investors, including all of our employees.
This proposal to privatize will ultimately be done through our shareholder vote. If this process ends the way I expected, a privatized Tesla company will end up being a huge opportunity for all of us. Whatever the outcome, the future is very bright and we will continue to strive to achieve our mission.
Thank you.
Elon
Friday, August 10
*Latest Show*
Old Ma and Yasser had a text message conversation. The cooperation that was negotiated before, the first rift appeared.
Elon
This is a big problem. It is extremely important that you confirm that you are discussing the privatization transaction with me. There is nothing else to say. If this is not stated, we will never talk again, never.
Yasser
Elon Musk, as you know, PIF bought a passive stake in Tesla stock in the market in April 2018 as part of our investment strategy to diversify from oil and increase investment in emerging technologies, including electric vehicles. PIF remains interested in potential investment opportunities in line with its investment strategy, and the electric vehicle sector is one of the opportunities we are interested in. We hope to explore investment in Tesla, provided that a Tesla production center can be established in the Kingdom of Saudi Arabia to serve the Middle East and North Africa region, Europe, Asia and Africa. We can provide appropriate incentives in all aspects (subsidies for energy and land taxes, support for financing, etc.). So, as discussed, we want our team to start working together in a confidential way to explore potential deals.
Good luck
Yasser
Elon
Thank you, thank you very much. It is very important that the media inquiry confirms this statement.
Yasser
Please note that any Saudi business will be 100% owned by Tesla and without conditions.
Elon
Got it, thanks
Sunday, August 12
*Latest Show*
The dialogue continues and the rift continues to widen.
Yasser
It's up to you, Elon
Elon
You're throwing me under the bus
Yasser
Tango needs two people to jump up, and we haven't received anything yet
Yasser
Let's talk about it on the phone
Yasser
Is it convenient for you now?
Elon
I'm sorry
Elon
It's over
Elon
I was deeply offended
Yasser
https://www.bloomberg.com/news/articles/2018-08-12/saudi-fund-is-said-to-be-in-talks-to-invest-in-tesla-buyout-deal
Elon
This is an extremely weak statement, and it does not reflect our conversations at Tesla. You said you were absolutely interested in taking Tesla private and wanted to do so since 2016. You also made it clear that you are the decision-maker and have the strong support of the Crown Prince, who he believes is of great strategic importance at the national level.
Elon
I'm sorry, but we can't work together
Yasser
Details about how we took the company private
Yasser
That is what we agreed upon
Yasser
What percentage is required, and so on
Yasser
What is the regulatory threshold required to privatize it?
Elon
Yasser, when we met at Tesla recently, you said you were the PIF decision maker, you wanted to get a deal to take Tesla private for two years, and that was directly supported by the Crown Prince. I checked with my team members who were in the meeting at the time to prevent a mistake, and they confirmed that.
Elon
You're very financially experienced and you know exactly what privatization requires, which is to provide at least a 20% market premium in order to buy out any shareholders who are unwilling to stay when going privatized. It's all standard practice, and it's not surprising at all.
Elon
There are many other investment funds that want to participate in the deal. We don't need your fund to do this. I wouldn't work with an organization whose public statements to the media were inconsistent with private statements about me and my team.
Yasser
We haven't done the privatization of any company in the U.S. or anywhere else. And what my people have documented is that we have reached an agreement that is waiting for you to send you a message on how we are moving forward together within a week.
Elon
Please propose to the Crown Prince, I would like to personally apologize and explain why Tesla did not cooperate with PIF for this transaction.
Yasser
We haven't released it to the media yet.
Yasser
Please read this article
Elon
I read this article. The article is weak and makes me sound like a liar. It's full of ambiguous messages that simply don't indicate the strong interest you've personally expressed.
Yasser
Let's talk as soon as possible. Please let me know what time is right
Elon
I'm sorry, but we won't have any further communication unless you can address the public's mixed views of support and interest in the PIF. That's not what you mean privately to me and my team. A person is either a friend or not a friend. No friend will say one thing in private and another in public. This is not true.
Elon
Given these behaviors, and you haven't taken any meaningful steps to correct them, Tesla will work with Silver Lake, Goldman Sachs and other investors to push tesla private.
Elon
Please let them know if you want to keep or sell your existing Tesla positions.
Yasser
I'll let Shihana call Sam and they can take care of the PIF's statement.
Elon
Thank you. This means a lot.
Yasser
/Fold your hands together
Monday, August 13
Lao Ma continued to post blog posts on Tesla's official website to update the progress of things.
https://www.tesla.com/en_GB/blog/update-taking-tesla-private
Update on the privatization of Tesla
Elon Musk
August 13, 2018
As I announced last Tuesday, I'm considering taking Tesla private because I believe it could be good for our shareholders, enabling Tesla to operate in the best possible way and advancing our mission to accelerate the transition to sustainable energy. As I continue to consider this, I would like to answer some of the questions that have been raised since last Tuesday.
What has happened so far?
On August 2, I informed Tesla's board that I wanted to take Tesla private in my personal capacity at $420 per share. That's a 20 percent premium to the stock price of about $350 at the time (which is already about 16 percent higher than the price before the announcement of second-quarter earnings on Aug. 1). My proposal is based on a structure whereby any existing shareholder, such as a shareholder who wishes to remain privately owned Tesla, can do so, and the $420 per share option is only available to shareholders who wish to be acquired.
A general board meeting was held after the outside directors of the Board discussed my proposal (which I did not attend and Kimball did not attend). At that meeting, I spoke to the board about the funding discussions that had taken place (more on that below), and I explained why the proposal might be in Tesla's long-term interest.
At the end of that meeting, it was agreed that as the next step, I would get in touch with some of Tesla's largest shareholders. Our biggest investors have given Tesla tremendous support over the years, and it's important to me to understand whether they have the ability and willingness to continue as shareholders in a private Tesla. They were the people who chose to believe in Tesla at a time when no one believed in Tesla, and they were the people who believed in our future the most. I told the board that after I had these discussions, I would report back to them.
Why should I announce it publicly?
The only way I was able to have meaningful discussions with our largest shareholders was to fully confess to them my desire to take the company private. However, it would be incorrect to share information about privatization only with our largest investors, but not with all investors at the same time. It is therefore clear to me that the right thing to do is to publicly declare my intentions. To be clear, when I announce it publicly, like this blog post and all the other discussions I've had on this topic, I'm speaking for myself as a potential bidder for Tesla.
Why do I say "Funds are protected"?
Back nearly two years ago, Saudi Arabia's sovereign wealth fund approached me several times to discuss taking Tesla private. In early 2017, they met with me for the first time and expressed this interest because moving away from oil and diversifying is an important need. Then in the following year, they met with me a few more times, reiterated that interest, and worked to move forward with privatization. It is clear that saudi sovereign funds have sufficient funds to execute such transactions.
Recently, after Saudi funds bought nearly 5 percent of Tesla stock through the open market, they offered to meet again. The meeting was held on 31 July. During the meeting, the fund's managing director regretted that I had not previously advanced the privatization deal with them, and he strongly expressed his support for this time to fund Tesla's privatization transaction. I learned from him that no other decision-makers are needed and that they are in a hurry to push forward.
After the July 31 meeting, I have no doubt that the deal with the Saudi sovereign fund can be completed, and it is only a matter of moving the process forward. That's why I mentioned in my August 7 announcement that "funds are protected."
Following the August 7 announcement, I continued to communicate with the Managing Director of the Saudi Fund. He said he supported the move forward on the premise of conducting due diligence on financial and other aspects, as well as internal review procedures for their approval. He also asked for more details on how to proceed with privatization, including any necessary percentages and any regulatory requirements.
Another key point to highlight is that before anyone is asked to decide to go private, all the details of the plan will be made public, including the nature and origin of the funds to be used. However, it is too early to do so. I continue to have discussions with Saudi funds, and I'm also in discussions with some other investors, which is something I've been planning to do because I want Tesla to continue to have a broad investor base. It is appropriate to complete these discussions before submitting detailed proposals to independent board committees.
In addition, it is worth clarifying that most of the capital required for privatization will be financed by equity rather than debt, which means that this will not be like the standard leveraged buyout structure commonly used when companies go private. I think it would be unwise to leave Tesla with a significantly increased debt burden.
Therefore, the report that it would take more than $70 billion to take Tesla private greatly exaggerated the amount of capital raised that was actually needed. The $420 purchase price will only be used for shareholders who will no longer remain with our company in the event of Tesla's privatization. My best estimate at the moment is that about two-thirds of the shares owned by all existing investors will go to the privatization of Tesla.
What are the next steps?
As mentioned earlier, I made an announcement last Tuesday because I felt it was right and fair to do so that all investors had the same information at the same time. Now I will continue to talk to investors, and I have hired advisors to investigate a range of potential structures and options. Among other things, this will allow me to get a more accurate picture of how many of Tesla's existing public shareholders will continue to be shareholders if we become a private company.
If, and once a final proposal is made, a special committee of Tesla's board of directors will conduct an appropriate evaluation process. It is my understanding that the Commission, and the legal counsel it has chosen, is already in the process of being established. If the board's process results in an approved plan, it will need to obtain any necessary regulatory approvals, and then the plan will be submitted to Tesla shareholders for a vote.
*Latest Show*
On the same day after the blog was published, the conversation between Lao Ma and Yasser continued. The two sides have completely broken up.
Yasser
Elon, I was personally surprised. You've signed a non-disclosure agreement, and while we're waiting for you and your team to give us information to move forward, you've posted an underconsidered blog that's very loose. In any case, we hope that you and your team will gather information as soon as possible and send it to us to move forward.
Yasser
Elon
You should not wait
Elon
I'm still angry
Elon
You make people think I'm a liar
Elon
Reuters reported that two PIF sources confirmed no interest in Tesla. It's absolutely disinformation, but you didn't do anything until I pressed.
Elon
Regarding the privatization proposal, I have approached Silver Lake and Goldman Sachs. We will have the documents ready in about a week. Since we are a public company, any non-public information about Tesla needs to be carefully reviewed. If it is considered important information by the legal counsel, it will need to be provided to all shareholders at the same time.
Wednesday, August 22
During this period, Elon's privatization plan was strongly opposed by many existing Tesla shareholders. Many shareholders issued statements strongly urging Tesla not to take it private. Perhaps the most widely known is an open letter from Catherine Wood, the "Wooden Sister" of the Ark Investment Fund, to Elon.
Here are excerpts and translations of several of these passages, and the full empty letter can be found on the Ark official website
https://ark-invest.com/articles/analyst-research/tesla-private/
Dear Elon: An open letter about taking Tesla private
Catherine Wood
August 22, 2018
Dear Elon and Tesla Board,
As a Tesla shareholder and Chief Investment Officer of Ark Investments, I am writing to express some of our thoughts on your company's prospects and investment potential. We believe that Tesla should continue to be a public company.
According to research by Ark Investments, tesla should be worth between $700 and $4,000 per share after five years. Taking Tesla private today at $420 per share would significantly undervalue it, depriving many investors of the opportunity to participate in its success. In our opinion, if there is a suitable investment cycle, today's TSLA is an extremely valuable stock.
。。。
Because of the short-term investment cycle of public market investors and the inflated valuations of today's private markets, I understand why you might want to take Tesla private, but I have to try to dissuade you.
First, as a private company, Tesla will not be able to leverage its competitive advantage as quickly and substantially as a public company, which is an important consideration considering that the network of driverless taxis and trucks will be subordinated to network effects and physical geographic monopolies.
Second, in the private market, Tesla will lose the free publicity associated with you as CEO of a public company, not only about the best-selling mid-size high-end sedan in the United States, but also about launching a fully driverless taxi network nationwide in the coming years. Just ask Michael Dell: There's a reason he wants to lead a public company again.
Third, you will deprive most individual investors of the securities you bet on and your strategy, transferring this opportunity to high net worth and institutional investors.
Finally, if you don't take Tesla private, you'll be surprised and relieved by the investors' responses once they realize and understand the scope and impact of your long-term vision and strategy. Over time, I believe that truth always wins in the public markets, as do Apple, Amazon, Netflix, Salesforce, and other companies with visionary leaders.
。。。
Please don't let the short-term thinking of professional public equity investors convince you to take Tesla private. I believe that your constraints on the private market will be stricter and will deprive a broad and loyal investor base of one of the most important investment opportunities in their lifetime.
With great respect and admiration.
Kathy
Friday, August 24
The privatization attempt failed, the dust settled, and the old horse blog announced the conclusion
https://www.tesla.com/en_GB/blog/staying-public
Stay publicly available
Elon Musk
August 24, 2018
Earlier this month, I announced that I was considering taking Tesla private. As part of this process, it's important to understand whether our current investors think this will be a good strategic move, and whether they're willing to get involved in taking Tesla private.
Our investors are very important to me. Almost all of our investors have supported us since we went public in 2010, when we didn't make cars and only had a vision of what we wanted to be. They firmly believe in our mission to advance sustainable energy and care deeply about our success.
I work with Silver Lake, Goldman Sachs, and Morgan Stanley, who have world-class expertise in these matters to consider the many factors of Tesla's privatization and to tease out all the interest and interest we've received from investors to fund the privatization deal. I've also spent quite a bit of time listening to current shareholders, large and small, to understand what they think is in Tesla's best long-term interests.
Based on all the discussions that have taken place over the past few weeks and the thorough consideration of "what's best for a company," there are a few things that are very clear
Based on the feedback I've received, it's clear that most of Tesla's existing shareholders think it would be better for us to exist as a public company. In addition, some institutional shareholders explained that they had internal compliance issues that limited the amount of money they could invest in private companies. If we become a private company, most retail investors have no proven path to owning a stake. Although most of the shareholders I spoke to said they would continue to remain shareholders of Tesla if we went private, overall, their view was "please don't do this."
I knew before that the privatization process would be challenging, but it was clear that it was more time-consuming and distracting than I initially expected. This is a problem because we have to focus absolutely on ramping up the capacity of the Model 3 and making a profit. Unless we are also financially sustainable, we will not be able to achieve our mission of advancing sustainable energy.
Still, in the process, my belief that there was enough money to privatize Tesla was reinforced.
After considering all of these factors, I met with Tesla's board yesterday and let them know that I believe a better path is for Tesla to remain publicly available. The Board of Directors agreed.
Going forward, we will continue to focus on what matters most: producing products that people love that will make a difference in the common future of life on Earth. We've shown that we can produce great sustainable energy products. What we need to show now is that we can continue to be profitable. With all the progress we've made on the Model 3, we're going to be able to do that, and that's what my team and I'm going to put into it.
Thank you to all our investors, customers and employees for your support of our company. I am thrilled to continue to lead Tesla as a public company. It is my pleasure.
(above)
The disclosure of court documents on page 122 shows a text message conversation between Elon and Yasser. Source: Bloomberg