Tesla’s board of directors is preparing to consider Elon Musk’s plan to take the electric car private. But as of yesterday afternoon—more than two days after Musk’s original tweet announcing the proposal—Tesla’s board had still not been told who would pay for the deal, Reuters has reported.
The commission “has not yet received specific information on who will provide the funding,” a source told Reuters.
It’s the latest sign of just how unconventional Musk’s personal agenda is.
Normally, a president considering a deal of this size will make sure all the details are set before making a public announcement. He will receive firm commitments from the funders. He will get buy-in from the board of directors. And then it will announce the full details of the plan in a single, well-verified press release—designed after markets close for the day.
Instead, Musk seems to be making things up as he goes. We still don’t know how the transaction will be structured or who will finance it. Tesla board members has said Musk had discussed the possibility of going private with them a week before the public announcement. But talking about it as a scientific option is very different from talking briefly about a specific idea.
Musk has said he wants to allow thousands of small investors to keep their money in the company—even though SEC regulations are designed to prevent private companies from having thousands of shareholders.
Tesla’s stock price over the past few days signals growing market skepticism that a private deal will actually go through. If the market is confident that the deal will go through, the stock should have sold up to almost $420 the price Musk mentioned in his tweet.
Tesla stock rose by 11 percent on Tuesday, to nearly $380. But that’s less than $420. And since then, Tesla’s stock price has declined three days in a row. It’s currently around $350—higher than the $344 opening price on Tuesday, the day Musk first tweeted about the idea. That suggests that many traders do not believe that Musk’s plan will actually go through.
In any event, the Tesla board now needs to decide whether to approve Musk’s plan or not. “Tesla’s board of directors plans to meet with financial advisors next week to formulate a strategy to explore Elon Musk’s personal opinion,” sources told CNBC.
Musk would say that he should recuse himself from the process. A small committee of independent board members will take a deeper look at the proposal and make a recommendation to the full board.
An independent review is important because dissenting shareholders will almost certainly go to court to challenge the deal. To win such a lawsuit, it would be very helpful if Tesla could argue that Tesla’s independent board members—those not closely connected to Musk or Tesla’s management—reviewed the proposal and concluded that it was in the interests of all shareholders.
The stakes are particularly high for Musk because government securities laws make it illegal to manipulate the market using misleading information. If Musk fails to produce a credible plan to go private—including identifying investors willing to fund the plan—Musk could face lawsuits and SEC scrutiny for tweeting that he has “money secured” for a deal .