Why Musk Pulled the Plug on Tesla Going Private

If there is a trend at Tesla, it's that there's always more to the various stories. Case in point: On Friday night, CEO Elon Musk posted a piece on Tesla's blog saying that plans have been scrapped about taking the company private.

"Although the majority of shareholders I spoke to said they would remain with Tesla if we went private, the sentiment, in a nutshell, was ‘please don’t do this,” Musk wrote.

But what led him to this decision? Over the weekend, Bloomberg, The New York Times and Wall Street Journal published pieces into Musk's reversal. The short of it comes down to Musk jumped the gun with his announcement earlier this month on Twitter without making sure everything was in place.

Quote

In that time, according to five people close to the events, Mr. Musk came to realize that his thinking had been overly simplistic. While going private might have removed some problems, it would have introduced new ones.

Among his concerns were ceding too much control to private investors — including conventional car companies and Saudi Arabia, a symbol of big oil — and shutting out smaller investors who might be unable to retain a stake.

This from the New York Times - emphasis mine.

Let's begin with Saudi Arabia. As we reported earlier this month, Musk said in a blog post that he believed Saudi Arabia's Public Investment Fund could provide the funding necessary for the move to go private. This was based on discussions between the two, along with the fund purchasing a small stake into the company. The Saudi's didn't share the same enthusiasm. While the fund was open to make a significant investment into Tesla to hedge the country against oil and help attract tech expertise, sources tell Bloomberg the fund was only interested in a minority stake. The two hadn't reached an agreement on the possible terms according to a source, before Musk made his post announcing the fund.

The Wall Street Journal learned from a government official that Musk's post angered some senior officials in the kingdom. Some officials wondered about Musk's "health as well as the role he would play in the company." This might explain some of reasoning behind the possibility of Saudi Arabia's PIF investing to Lucid Motors - something we brought to light last week.

Meanwhile, there were concerns at Tesla about Saudi Arabia. Some complained to Musk about selling a large chunk of shares to a foreign oil producer wouldn't be a good look.

As for the private investors, the Journal reports that Goldman Sachs and private-equity firm were brought in to help facilitate a deal. Last Wednesday, the two presented Musk a roster of investors including Volkswagen and Silver Lake itself (promising to contribute up to $30 billion according to sources). But these weren't the investors that Musk wanted as he was suspicious of rival car companies, along with losing a number of small investors. There would also be a catch as the two explained the money being provided would have strings attached such as having a lot of say in how the company is run.

A day later, Musk met with the board saying that he would be withdrawing the idea of going private.

Source: Bloomberg, New York Times, Wall Street Journal (Subscription Required)