Tesla forms special board committee to evaluate bid to go private

August 14, 2018 14:46 CET

SAN FRANCISCO — Tesla’s board formed a special committee to evaluate Elon Musk’s proposal to take the electric-car maker private. The move came a day after the CEO revealed more on who will advise him and help fund the potential deal.

Independent directors Brad Buss, Robyn Denholm and Linda Johnson Rice will comprise the committee, which hasn’t yet received a formal proposal from Musk, according to a Tesla statement Tuesday. They haven’t reached any conclusion on whether taking the company private is advisable or feasible.

Musk, 47, set off a firestorm a week ago with his highly unconventional announcement of the effort to take a company off the public markets and has been slowly releasing details since in tweets and blog posts that have preempted Tesla’s board. The chairman and CEO wrote late Monday that he is getting advice from Goldman Sachs Group and private-equity firm Silver Lake and has lined up legal advisers. Earlier in the day, he said Saudi Arabia first approached him with interest in helping take Tesla private early last year.

Tesla shares fell 2.5 percent on Tuesday to close at $347.64 in New York. The stock remains well below the $420 level at which Musk has said existing shareholders could be bought out if they choose, underscoring investor skepticism that the deal is doable.

While Tesla considers Buss to be an independent director, major proxy advisory firms Institutional Shareholder Services and Glass Lewis don’t because he served as the chief financial officer of SolarCity before Tesla acquired the company in 2016.

Denholm is the chief operating officer of Telstra, Australia’s largest telecommunications company. Rice, who leads Johnson Publishing, known for producing Ebony magazine, is one of the two newest directors on the board. Tesla appointed her and James Rupert Murdoch, the CEO of 21st Century Fox, to the board in July 2017.

The Tesla board’s special committee has hired Latham & Watkins LLP for legal counsel and plans to retain an independent financial adviser to assist its review, according to the statement. The company has separately retained Wilson Sonsini Goodrich & Rosati for legal counsel.

“The special committee has not yet received a formal proposal from Mr. Musk regarding any Going Private Transaction,” the company said in a public filing with U.S. securities regulators, the first it has made since Musk’s tweets last week.

Asked about the outcome of the special committee, analyst Chaim Siegel at Elazar Advisors said, “This is not easy. Anything is possible from pulling something together to nothing. I hope nothing — so the stock can trade and benefit from the earnings inflection,” he said, referring to a promise by Musk the company would turn profitable later this year.

Blogging, tweeting CEO

Musk has yet to convince Wall Street analysts and investors that he can find the billions needed to complete the deal. Tesla’s handling of Musk’s proposal and its failure to promptly file a formal disclosure, meanwhile, have raised governance concerns and sparked questions about how companies use social media.

Musk first tweeted he planned to go private and that funding was “secured” last week, sending Tesla shares soaring 11 percent, but investors have appeared skeptical about the details he has provided since.

He blogged on Monday that recent talks with a Saudi sovereign wealth fund gave him confidence funding was nailed down, but that he was still talking with the fund and other investors. He tweeted later he was working with Goldman Sachs Group and Silver Lake as financial advisers, though a source said the private equity firm was working in an unpaid, informal capacity and also not discussing participating as an investor.

“Despite Elon Musk’s frustration with being a public company, I think there are more advantages to remaining public,” said CFRA analyst Efraim Levy, citing cheaper access to capital and media exposure due to interest in a public company.

Board members

Tesla’s other board members include Musk; his brother Kimbal Musk; Antonio Gracias, founder of Valor Equity Partners; and Ira Ehrenpreis, founder of venture capital firm DBL Partners.

One director, Steve Jurvetson, is currently on leave of absence following allegations of sexual harassment.

Tesla’s board said on Aug. 8 that Musk had held talks with the directors in the previous week on taking the company private.

Reuters and Bloomberg contributed to this report

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