Musk's plan, when he tweeted it, seemed likely to fail at that time.  "It would be a great challenge to bring a subgroup of several thousand shareholders into a kind of unity" The SEC would fall short of these thresholds, "says Diamond.
Another way to remove Tesla from the public exchange would be to carry it out "Leveraged buy-out," said Ann Lipton, a staff professor in corporate law at Tulane University, where the goal is the same e – buy out the shareholders so that there are only a few left – but the source of the money is different. Instead of trading the ownership shares for financing, Tesla lends money from companies like banks to buy up the shareholders. Financial forms often call debt
Leverage as this sounds less dangerous. therefore "Leveraged Buyout" instead of "Debt-Buyed Buyout".
The problem with that, says Lipton, is that Tesla already had a
amount of debt – about $ 11 billion at the time of "funding secured" – and not much free cash.
"The theory of a leveraged buyout is that you use a cash-rich company and you use it to repay the debt, but that's not Tesla," she says.
If Tesla were private today, it probably would not have been through a leverage buyout. More likely, the first way would have been a small group of investors. If that had happened, it would have cost tens of billions of dollars and, according to Diamond, would have been "one of the largest and most complex private equity games". Since Musk
did not actually have funds financed from Saudi Arabia, he would probably have had to find it from existing or external institutional investors and then use it to buy the shareholders in a transaction.
Many shareholders would inevitably be annoyed (as some
were that day in August) by either the amount offered by musk or the way the deal was executed, professor of law the University of Iowa. This actually happens with many buyouts. Litigation over the deal price is particularly unavoidable, he says. But even if Musk "dotted his I's and crossed his cross," says Shill, there would probably be a lawsuit over how the process was handled.
Musk and Tesla would probably still defend the step in court.
To understand why, it's helpful to take a look at Tesla's acquisition of SolarCity in 2016. Musk was chairman of the solar energy company when he made the offer, and it was headed by his cousins. He agreed to the vote and 85 percent of shareholders agreed. However, some shareholders still complained that the trial was corrupt because of the close relationship between Musk and his cousins and the fact that Tesla's board of directors was stacked with Musk supporters. The case is still ongoing.
Lipton says Musk did not even pretend to negotiate gun lengths in the SolarCity case. Therefore, it would be possible for a similar case to be brought forward if Tesla had gone private. Even if Musk had successfully completed his efforts, he and Tesla would probably defend themselves in court today. (Instead, they are still resisting shareholder lawsuits for alleged securities fraud.)
What would Musk have gained through Tesla privatization?
If Musk had privatized Tesla in a more traditional way, it probably would not be & # 39; It was an SEC complaint. This means that Musk would continue to be the chairman, $ 20 million richer, and not appoint independent board members of Larry Ellison and Kathleen Wilson-Thompson to the company's board of directors.
If Tesla had become private, fewer people would have access to the company's financial data as the SEC would no longer need to publish those numbers. (However, Lipton points out that some of Tesla's debts are tied into bonds that require disclosure, so the company would have to pay that debt to really "go into the dark," she says.) The automaker would also do less Pressure from Wall Street analysts that view a company's stock price as a measure of performance. The company would be exempt from the obligation to report its financial results every quarter, which, according to Musk, "put enormous pressure on Tesla".
However, that does not mean that Tesla, according to Diamond, would be out of control.
"In a private environment, he would have some very hard co-owners representing very demanding investors," says Diamond. Consolidation of ownership means that this smaller group of stakeholders also has a "significant impact on day-to-day business".
"If he thinks he'll find some stupid billionaires out there who will give him, I think he makes a joke on himself," he says.
If you go private, Musk would have more control about Tesla's story
probably had more control over the company's narrative Diamond says
"He could avoid public scrutiny by investors and then use his own voice to make the Tesla story "The problem today is that he works with other investors, and that requires him to keep them up to date, and he has to be honest, he does not have to give them everything but when he speaks, he can not mislead them. "
The story of Tesla is crucial to Musk, and something he has tried to control, he has the media accused of having written stories that misrepresent what is happening in the business, and once go so far as to shame them during a teleconference. He constantly claims short sellers, people who make bets that a company will fail to spread lies about the company. "[S] hort sellers are desperately pushing for a narrative that will possibly lead to Tesla's destruction," he once told the New York Times
. Musk accused both journalists and sellers of "big oil".
Journalists would have less access to Tesla's financial data, although they would not stop covering Tesla. A private Tesla, however, means that the short sellers have no opportunity to place these bets against the company, says Shill.
Tesla short sellers existed long before the go-private attempt, but over the past year and a half, the number has grown as the company struggled to boost production of Model 3. They were linked to Twitter and even built a website to present their theories and research they claim to expose the fraudulent practices of Musk. Even if Musk had found a way to make Tesla private, this community of Internet nuisance would probably still be there.
"He would not knock the SEC police at the door."
Knowing all this, says Shill, Musk could have expected more than anything else from the SEC. If the company is private, Musk would "stay in the public imagination," stay on the front page of the Wall Street Journal
and be everywhere on Twitter, but he would not knock the cops at the door in the form of the SEC, "says he.
Musk has mocked the SEC several times over the months since the two sides reached an agreement. He called her the "Short Seller Enrichment Commission" and said to
60 Minutes that he did not respect the agency. Musk continues to struggle with the SEC over the deal it agreed last year. So you can easily imagine that he has a distance from the agency.
"That was the real attraction," says Shill.
The Tesla that never existed
A private Tesla would be less exposed to the public, more under the control of Musk, and relieved of the pressure to report well on a quarterly basis. However, this control would be directed against stronger, interested shareholders. Musk would probably still be his strange (and often belligerent) self on Twitter. The company would be involved in a lawsuit with its former shareholders, and individuals who believe that Tesla is a fraud would still work to prove it.
In the meantime, Tesla would still operate a young electric car company on the mass market, which needs a lot of 19459005 (19459006) money to survive – let alone grow. Even if Tesla had become private, that would probably not have remained private forever, says Diamond.
"The reason you go private is to focus management on solving production issues, restructure the business, and then make it even better for a larger number of investors," he says. "You want a quiet machine."