What the Wall Street Journal says happened The Wall Street Journal reports that Goldman Sachs and Silver Lake found “a roster of deep-pocketed investors, including Volkswagen and Silver Lake itself, that had agreed to contribute as much as $30 billion” to take Tesla private. The advisers from Goldman Sachs and Silver Lake were reportedly “confident it could be done”. (Loup Ventures estimated $25B to $30B would be needed to take Tesla private.) However, the article says the funding came with strings attached: “a lot of say” in how the company is run. Elon was reportedly “deeply suspicious” of Volkswagen — a rival, and might I add a company that has committed crimes to avoid progress on climate change — and therefore he was reluctant to give Volkswagen a say in Tesla’s management. There is also an anecdote about Elon feeling touched by the support of retail shareholders and “haunted” by the idea of shutting them out of the company. On Twitter, Elon said this was the “key showstopper”. It looks like going private would create the very problem it was intended to solve — it would put more control, rather than less, in the hands of investors who aren’t aligned with Elon’s long-term vision for Tesla. Suspect shareholders like Volkswagen would get a large stake, and supportive shareholders like Fidelity would be forced to reduce their stake. Retail shareholders would be iced out entirely. This corroborates what Cathie Wood, the CEO of ARK Invest, warned in her open letter to Elon: “ I believe you will be on a much shorter leash in the private markets”. What could happen next? Elon and/or Tesla may still face an SEC fine if the agency finds that Elon’s tweets were misleading or omitted material information. Besides the uncareful wording of the tweets (which should have been run by lawyers first), this process seems to me like it was well executed. Elon found world-class advisors, explored options, and found none of them were preferable to remaining public. He also talked to existing investors and found they were more aligned with his long-term vision for Tesla than he might have thought. The whole process was initiated and wrapped up in three weeks. It is painful that Elon didn’t have his tweets vetted by lawyers first. He could have avoided so much legal risk. He jumped the gun by saying the deal was “certain” except for a shareholder vote. That turned out not to be true. Saying “funding secured” left room for misinterpretation and apparently misled a lot of people. Saying “investor support confirmed” is similarly ambiguous and leaves out a more complicated, fuller picture that should have been disclosed up front. The SEC can pursue an enforcement case if material information was omitted from public statements. Most of the time, jumping the gun or speaking imprecisely doesn’t have serious negative consequences. But in the context of securities laws, it can. Elon most likely didn’t think he was doing anything wrong or legally risky. One of the good things about Tesla is that Elon is frank and transparent, and that his statements aren’t filtered through lawyers and PR people. But that also meant there was no system in place to prevent these tweets from going out with an unfortunate choice of words. Ultimately, a fine is probably fair. On one end of the spectrum, Gene Munster says he thinks there will be a small fine — less than $50,000. On the other end of the spectrum, damages could be as high as $1.4 billion, and the SEC could make Elon and/or Tesla pay that amount. Then there’s a huge space between. This isn’t because Elon did anything fraudulent, evil, or crazy. He just spoke in his regular manner of speaking — which is blunt, assertive, and at times overconfident and overoptimistic — without adequate awareness or care around how carefully his words need to be chosen to avoid unnecessary risk under securities laws.