As part of a lawsuit between shareholders and Elon Musk regarding his “funding secured” tweet, new text messages and emails between Musk and people involved have been released.
The communications pretty much confirmed how most people saw the situation: Elon Musk took a meeting with the head of Saudi Arabia’s Public Investment Fund (PIF) and had early discussions about taking Tesla private, which he took as enough to say that the “funding was secured”.
The whole ‘”funding secured” situation is coming back to light because Musk is trying to buy Twitter to take it private, and the Tesla CEO is still embroiled in lawsuits over the situation. For those who don’t remember the situation, back in 2018, Musk briefly considered trying to bring Tesla private and disclosed that to investors through a simple tweet.
The Security and Exchange Commission (SEC) ruled that Musk exaggerated and misled shareholders when saying that the funding was “secured” in the tweet:
Musk went on a campaign against the SEC, calling them names and claiming that they were working for people shorting the electric automaker. But ultimately, Tesla and Musk ended up reaching a settlement with the SEC.
As part of the settlement, Musk agreed to step down from the role of chairman of the board, and Tesla and Musk had to each pay $20 million in fines.
The CEO presumably didn’t want Tesla to have to pay for his issue with the SEC. While he couldn’t directly pay for Tesla’s part of the fine, he decided to buy $20 million worth of shares from Tesla. That way, he sort of indirectly ended up paying for Tesla’s fine – though he also ended up with ~71,000 additional Tesla shares in the process.
As we previously reported, Musk ended up actually making money from the settlement due to Tesla’s stock price surging.
Another part of the settlement was that Musk and Tesla had to agree for the former to have his tweets reviewed by the latter’s legal department if they are material to the company.
Earlier this month, Musk brought up the whole situation in an interview at TED and insisted that he didn’t lie about the funding being secured, and that he was forced to settle with the SEC to save Tesla.
However, the CEO never went into the details of that said funding. There were always rumors that the Saudi Arabia’s Public Investment Fund (PIF) was interested in investing and taking Tesla private.
The common-sense explanation that most people agreed on is that Musk met with PIF, and they showed strong interest in taking Tesla private, and Musk took the meeting seriously enough to claim that funding was secured.
The SEC obviously disagreed with the level of commitment.
Now new text messages between Musk, Musk’s associates, and Yasir bin Othman Al-Rumayyan – the head of PIF – and his own associates, show behind the scenes of that common-sense explanation.
Here, Musk complains about PIF telling the media that it didn’t commit funds for taking Tesla private, and PIF responds that they need to see financial information and have a “kickoff call” with their team:
Musk was really “upset” that PIF wasn’t confirming his interpretation of their meeting:
In one text, Musk asked PIF to confirm that they are in discussions with Tesla and threatened to “never speak again” if they don’t:
This is a major problem. It is extremely important that you confirm that you are in discussions with me regarding the take-private transaction. Noting more needs to be said. If this is not said, we will never speak again. Never.
When things fell through with Saudi Arabia, texts messages even show that Musk reached out to Larry Page to invest in the deal. A recurring problem with Musk making any deal actually work seemed to be how he misjudged Tesla’s ability to retain smaller investors in a take-private deal.
From the new texts and testimony being released, it’s pretty clear that it is as simple as Musk meeting PIF, them showing a strong interest in helping him take Tesla private, but nothing more came of it. They never went into the details, even according to Musk’s testimony, and PIF seemed to be waiting for more information.
This is pretty much how everyone saw the situation.
The SEC, which clearly already had an issue with Musk sharing material information about a public company, Tesla, through Twitter, took offense and investigated. They determined that this was not enough to claim “funding secured”.
Musk obviously knows the difference, since he took a different route for the Twitter deal, in which he just indeed secured funding.
Personally, I don’t think it’s that big of a deal. He should have only tweeted that he is exploring the possibility of taking Tesla private and discussing funding with some parties, and not that “funding is secured.”
I understand that Musk was frustrated by how the deal with the SEC went down, but ultimately, it turned out great for him. He paid Tesla’s fine with stocks and made hundreds of millions out of it.
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Author: Fred Lambert