Musk’s “funding secured” claim was never more than verbal interest from investors 

Musk did not have a firm commitment when he tweeted “funding secured,” according to the SEC. On July 31, Musk held informal discussions with a sovereign wealth fund, most likely Saudi Arabia, which was potentially interested in taking the company private. Musk reported that in the meeting a fund representative expressed interest in a transaction to take Tesla private, and was allegedly fine with “reasonable” terms. That was not enough for the SEC. “Musk acknowledged that no specific deal terms had been established at the meeting and that there was no discussion of what would or would not be considered reasonable,” the agency alleges. “Nothing was exchanged in writing, and there was no discussion of confidentiality. Musk did not communicate with representatives of the Fund again about a going-private transaction until August 10, three days after his August 7 statement.”

Musk barely discussed the move with Tesla’s board

Musk later disclosed that Tesla’s board had never reviewed a detailed proposal. Musk had only sent an email with the subject line, “Offer to Take Tesla Private at $420” on Aug. 2, explaining some of his rationale for taking Tesla private. The email asked the “matter be put to a shareholder vote at the earliest opportunity.”

The SEC says Musk acknowleged “a lot of uncertainty” regarding a potential going-private transaction at the time of his email to Tesla’s board, calling it “worth investigating.” He believed at the time that the likelihood of consummation of a transaction was about 50%, despite Musk’s August 7 tweet stating that “only reason why this is not certain is that it’s contingent on a shareholder vote.”

Musk made up the $420 price per share

Musk never discussed a $420 price per share with any potential funding source, according to the SEC. Instead, he based the price on a 20% premium over Tesla’s Aug. 2 closing share price because he thought 20% was a “standard premium” in going-private transactions. That calculation resulted in a price of $419, and Musk ostensibly rounded up to $420 “because he had recently learned about the number’s significance in marijuana culture and thought his girlfriend ‘would find it funny, which admittedly is not a great reason to pick a price.'”

Tesla’s chief financial officer drafted a post for Musk after the fact on the rationale to take Tesla private

Musk never cleared his tweets on taking Tesla private with Tesla’s board, Tesla executives, or outside advisors. On the afternoon of Aug. 7,  Tesla’s CFO sent Musk a text message 35 minutes after the tweet about taking Tesla private: “Elon, am sure you have thought about a broader communication on your rationale and structure to employees and potential investors. Would it help if [Tesla’s head of communications], [Tesla’s general counsel], and I draft a blog post or employee email for you?” Musk responded, “Yeah, that would be great.” Tesla’s CFO then replied, “Working on it. Will send you shortly.”

Tesla’s investor relations affirmed a “firm offer” to take Tesla private was on the table

Tesla’s head of investor relations confirmed Musk’s story with investment bank research analysts on Aug 7. The employee wrote in an email response to one analyst that “I can only say that the first Tweet clearly stated that ‘financing is secured’. Yes, there is a firm offer.” A second email repeated that “Elon’s first tweet, which mentioned ‘financing secured’ is correct.”

In a third email, the employee finally admitted to some uncertainty. “The very first tweet simply mentioned ‘Funding secured’ which means there is a firm offer. Elon did not disclose details of who the buyer is,” the employe wrote.  A followup question about whether this was a commitment letter or a verbal agreement, the investor relations representative responded, “I actually don’t know, but I would assume that given we went full-on public with this, the offer is as firm as it gets.”

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