Goldman's Missing Mandate Adds to Clues Musk Tweeted Out of Turn
Goldman Sachs Group hadn’t been formally tapped as financial adviser by Musk when he tweeted he’d secured the funding to do so.
(Bloomberg) -- A week after Elon Musk shocked the markets by proclaiming Tesla Inc. may become a private company, evidence has piled up that the mercurial chief executive officer was tweeting too soon.
Goldman Sachs Group Inc. hadn’t been formally tapped as a financial adviser by Tesla Inc.’s CEO when Musk revealed he may take the electric-car maker off the market and said he’d secured the funding to do so, according to people with knowledge of the matter. The bank and private equity firm Silver Lake still hadn’t officially signed on when Musk said on Twitter late Monday that he was working with them, the people said.
This adds to the ways in which Musk has jumped the gun in discussing his proposal to take Tesla private. The board has twice followed his social media posts by a day with more polished statements, and the company cautioned Tuesday that a special committee of three directors hadn’t concluded whether taking Tesla private would be advisable or feasible. The billionaire’s tweets also have drawn multiple shareholder lawsuits and scrutiny from the Securities and Exchange Commission.
“He has sophisticated advisers in place now, so hopefully we’ll see this moving forward in a more customary and usual matter,” Teresa Goody, a former SEC attorney and founder of the legal consulting firm The Goody Group, said of Musk Tuesday on Bloomberg Television. “This is generally not the way that you would go forward, and it’s not a recommended way of trying to reach shareholders.”
When a company announces it’s working with financial advisers, that typically signals a formal agreement. But conversations between Musk and the firms were ongoing as of Tuesday morning, said the people, who asked not to be identified because the information isn’t public. One person said that while Goldman Sachs and Silver Lake hadn’t officially been hired as advisers, Musk did meet with them in person last week.
Silver Lake’s Role
Silver Lake isn’t working for Musk in an official capacity as a financial adviser and isn’t being compensated as a consultant, according to a person with knowledge of the matter.
Instead, Tesla’s CEO is hoping to tap Silver Lake’s experience working on some of the biggest take-private transactions -- including Michael Dell’s $21.7 billion buyout of his namesake computer company, and its subsequent $67 billion acquisition of EMC Corp. -- to help get a deal done, the person said.
Each of those transactions involved the firm making an equity commitment to help fund the deal. While Silver Lake hasn’t committed any financing to Musk’s possible buyout of Tesla, the firm hasn’t ruled out potentially making an investment at some point, the person said.
A spokesman for Goldman Sachs declined to comment. Representatives for Silver Lake and Tesla didn’t respond to requests for comment. Tesla shares dropped 2.6 percent to $338.62 as of 9:48 a.m. on Wednesday, after closing on Tuesday at the lowest price since Musk’s initial tweets on Aug. 7.
Big Fees
Hefty fees hang in the balance for any adviser that ends up working on a potential deal. Jeffrey Nassof, a director at Freeman Consulting Services, estimated last week that banks advising Tesla could make $90 million to $120 million, while advisers to Musk could take home $30 million to $50 million.
Musk’s tweet Monday came hours after he wrote in a blog post that Saudi Arabia’s sovereign wealth fund had first approached him about helping take Tesla private early last year, and that the fund’s interest gave him the confidence to state publicly that he was thinking about the move.
“I left the July 31st meeting with no question that a deal with the Saudi sovereign fund could be closed, and that it was just a matter of getting the process moving,” Musk wrote.
Tesla’s board is in the process of selecting financial advisers to evaluate Musk’s proposal. The special committee, composed of directors Brad Buss, Robyn Denholm and Linda Johnson Rice, will take legal advice from Latham & Watkins LLP. The company has separately retained Wilson Sonsini Goodrich & Rosati for counsel.
--With assistance from David Westin and Dana Hull.
To contact the reporters on this story: Sridhar Natarajan in New York at snatarajan15@bloomberg.net;Alex Barinka in San Francisco at abarinka2@bloomberg.net
To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Elizabeth Fournier
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