Daily Times (Primos, PA)

‘Private’ mess: Musk’s credibilit­y goes from bad to worse

- By Tom Krisher

DETROIT » First it was the shocking tweet that funding was secured and Tesla may go private, then a statement that the money wasn’t locked down after all. Two weeks later it’s never mind, the whole deal is off.

Welcome to the disarray of Elon Musk, the impulsive genius and architect of cutting-edge car, rocket and solar panel companies built nearly from scratch.

Chaos, though, comes with a price. Experts say it all could wind up with Tesla exposed to a fine for misleading investors. And even though Musk has almost legendary status, the episode could further erode his credibilit­y with stakeholde­rs who have endured multiple broken promises and years of losses as a public company.

“Prior to the go-private episode, his credibilit­y was in question, although investors still had overall confidence in the guy,” Erik Gordon, a business and law professor at the University of Michigan, said Saturday. “This whole go-private episode has taken his credibilit­y close to zero.”

The bizarre story began Aug. 7 when Musk, while driving to the airport, tweeted he was considerin­g taking the company private and that funding had been secured for the deal. Investors would be paid $420 per share, a 23 percent premium over the Aug. 6 closing price. No other details were given, but Tesla’s stock shot up 11 percent that day. At $420, buying all Tesla shares would cost around $72 billion.

Then, in a blog post six days later, Musk wrote the money wasn’t locked down, revealing that Saudi Arabia’s Public Investment Fund was the source of the cash but was still doing due diligence. Musk said the Tesla board and some big investors had been told he was considerin­g taking the company private before he tweeted that informatio­n. He said he tweeted the disclosure so everyone could have the informatio­n.

Musk, who owns 20 percent of Tesla, also said he expected only a third of shareholde­rs to sell, meaning the deal would be valued around $24 billion.

Late Friday came a statement from Musk saying that after talking to investors, the plan to go private would be scrubbed. Big institutio­nal investors told him they had limits on how much they could sink into a private company.

The episode drew attention from the U.S. Securities and Exchange Commission, which reportedly is investigat­ing Tesla for possible manipulati­on of the stock price. At least two lawsuits seeking class-action status also have been filed alleging Musk broke securities laws by making it sound like financing for the buyout was lined up.

James Cox, a Duke University professor who specialize­s in corporate governance and securities law, said regulation­s prohibit companies from making misleading statements that influence the markets.

“The fact that he’s now backing off so quickly, within a matter of weeks, indicates the insincerit­y in which the first statement was made,” Cox said.

While Musk disclosed the possible buy-back on Aug. 7, he didn’t reveal all contingenc­ies including that the Saudi fund had to investigat­e, said Peter Henning, a Wayne State University law professor and former SEC attorney. “I think his most recent statement shows that this wasn’t thought through,” Henning said. “That’s going to be a concern for the SEC because that’s how investors can be misled, with incomplete informatio­n.”

The SEC also is likely to look at Musk’s disclosure to some investors before others, which also is prohibited if there’s reason to believe the investors might trade stock based on the informatio­n, Cox said.

Calling the whole thing off, though, might also be a defense for Musk, Henning said. “He could say I was just testing the waters. I was just thinking out loud, so I didn’t mean to mislead anyone on this.”

Normally, if a company was mulling a plan to go private, the CEO would notify the board and a process would be put in place to evaluate the move, Henning says. Lawyers would be involved and it would be disclosed in a filing with the SEC.

 ?? KIICHIRO SATO, FILE - THE ASSOCIATED PRESS ?? Tesla CEO and founder of the Boring Company Elon Musk speaks at a news conference in Chicago. For years, Tesla’s board remained almost invisible, staying behind the curtain as Musk guided the electric car maker to huge stock price increases. Now, given Musk’s recent questionab­le behavior, experts say it’s time for the board to step onstage and take action on the company’s leadership.
KIICHIRO SATO, FILE - THE ASSOCIATED PRESS Tesla CEO and founder of the Boring Company Elon Musk speaks at a news conference in Chicago. For years, Tesla’s board remained almost invisible, staying behind the curtain as Musk guided the electric car maker to huge stock price increases. Now, given Musk’s recent questionab­le behavior, experts say it’s time for the board to step onstage and take action on the company’s leadership.

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