Tesla chief Elon Musk says his plan would require far less than the £55bn estimated by some, as he seeks to justify last week’s surprise tweet
Elon Musk has said his proposal to take electric car maker Tesla private would be conducted on his own initiative, and would be backed by Saudi Arabia’s sovereign wealth fund.
The plan would also require far less than the $70 billion (£55bn) that has been estimated, since Musk would seek only to buy out shareholders who do not want to remain with the company once it goes private, he said in a Monday blog post.
Musk’s comments come days after two lawsuits were filed alleging that his revelation of the plan last week was a fraud designed to harm short sellers, those betting that Tesla’s shares will fall in value.
The lawsuits criticised Musk and Tesla for failing to provide proof that funding was “secured”, as Musk asserted on Twitter last week, arguing that the announcement violated US securities rules.
Musk justified the highly unusual disclosure of his plan over Twitter by saying that it was necessary to inform all shareholders of his idea before moving forward.
After discussing the matter with Tesla’s board, he intended to approach large shareholders, in part to find out whether they would want to remain with the company after it went private. He said it wouldn’t have been fair for the information to be kept from the rest of Tesla’s shareholders.
“As a result, it was clear to me that the right thing to do was announce my intentions publicly,” Musk wrote. “To be clear, when I made the public announcement, just as with this blog post and all other discussions I have had on this topic, I am speaking for myself as a potential bidder for Tesla.”
Musk said Saudi Arabia’s sovereign fund has repeatedly expressed its interest in providing the funding to take Tesla private as a way of diversifying away from its oil resources.
After buying almost 5 percent of Tesla stock through public markets, the fund met with Musk on 31 July to reiterate its support for a bid.
“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,” Musk wrote.
Because it would be necessary to buy out only those investors who wouldn’t want to remain with the company following the deal, Musk said the amount of funding needed would be easily within the reach of the Saudi fund.
But he said he is also in talks with other potential investors in order to maintain a “broad investor base” for Tesla.
“The $420 buyout price would only be used for Tesla shareholders who do not remain with our company if it is private,” Musk wrote. “My best estimate right now is that approximately two-thirds of shares owned by all current investors would roll over into a private Tesla.”
The proposed arrangement would mean Tesla wouldn’t be required to take on much more debt, since most of the funds needed would be covered by equity.
Musk said he is planning to continue speaking with large investors, after which a final proposal may be presented to Tesla’s board.
“If the board process results in an approved plan, any required regulatory approvals will need to be obtained and the plan will be presented to Tesla shareholders for a vote,” he wrote.