SOLVING THE TESLA PUZZLE
Good morning, Term Sheet readers.
BREAKING: Right as I was about to press “send” on this newsletter, I saw this: Elon Musk published an update on taking Tesla private.
In a Q&A style blog post, Musk answers questions such as “Why did I make a public announcement” and “why did I say ‘funding secured.’ In regards to the latter, he explains that Saudi Arabia’s Public Investment Fund (PIF) had approached him “multiple times about taking Tesla private” since the beginning of 2017. The two groups reportedly held several meetings over the next year to try to move forward with a going private transaction.
Musk adds, “Obviously, the Saudi sovereign fund has more than enough capital needed to execute on such a transaction.”
After the Saudi fund bought almost 5% of Tesla stock through the public markets, they reportedly reached out about another meeting. That meeting took place on July 31st, Musk writes.
After meeting with the managing director of the fund, Musk was led to believe that “no other decision makers were needed and that they were eager to proceed.”
“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,” he said. “This is why I referred to ‘funding secured’ in the August 7th announcement.
So this begs the question: Was funding actually secured?…Or did Musk just come away from the meeting with the belief/hope/idea that the PIF would invest without funding actually being secured? Not sure how the SEC will feel about all that.
Musk explains that the PIF’s managing director “has expressed support for proceeding subject to financial and other due diligence.” The director has also reportedly asked for additional details on how the company would be taken private, including any required percentages and any regulatory requirements.
And then it gets even murkier. Musk says he’s also having discussions with a number of other investors….Like someone aptly said on Twitter, “It’s not not the Saudis, basically.”
Musk also said he’s been reaching out to Tesla’s largest shareholders and that most of the capital required to take the company private will be funded by equity, rather than debt.
“The $420 buyout price would only be used for Tesla shareholders who do not remain with our company if it is private,” he wrote in the blog post. “My best estimate right now is that approximately two-thirds of shares owned by all current investors would roll over into a private Tesla.”
Over the last few weeks, several Term Sheet readers have e-mailed me with thoughts on what’s going on. I got everything from “Impossible to have lined up the financing to take this dog private!” to “End of the day, Musk is once again letting his ego and mouth take over and at some point it will cost him dearly — it is just a matter of time.”
But after all, it’s Elon Musk, we’re talking about. And with Elon Musk, it feels like everything is on the table at all times.
DEAL BUSTS: There has already been $540 billion in broken deals so far this year. Increased government scrutiny and investor activism are behind rise in failed blockbuster takeovers. Among the casualties are chipmaker Broadcom’s $142 billion hostile bid for rival Qualcomm, which was blocked by Donald Trump on national security grounds, and Qualcomm’s $44 billionn pursuit of NXP Semiconductors, which China refused to approve. Read more.
THE LATEST FROM FORTUNE…
• Blockchain for Identity: Too Good to Be True? (by Jeff John Roberts)
• Why Turkey’s Collapsing Currency Is Tainting World Markets (by David Meyer)
• Bitcoin Investing Is Creating Giant Tax Headaches for Hedge Funds
• Google’s Path Back Into China Includes a Host of Local Partners (by David Z. Morris)
• MyDreamPlus, a China-based workspace service brand, raised $120 million in Series C funding. Hillhouse Capital and General Atlantic co-led the round, and were joined by investors including JOY Capital, Ocean Link, M31 Management Fund of Giant Network Group, and K2VC.
• Mines, a San Mateo, Calif.-based fintech startup that has built a credit platform for emerging markets, raised $13 million in Series A funding. TPG Growth led the round.
• Appcues, a Boston-based software company, raised $10 million in Series A funding. Sierra Ventures led the round.
• Lyvly, a U.K.-based community platform that helps landlords and renters find and manage shared living accommodation, raised $4.6 million in Series A funding. The investor was Mosaic Ventures.
• SenSat, a U.K.-based tech company that simulates reality, raised 3.31 million pounds ($4.2 million) in seed funding. Investors include Force Over Mass, Round Hill Venture Partners and Zagm.
• Carepoynt, a Newport Beach, Calif.-based digital health startup, raised $2 million in seed funding. The investors were not named.
HEALTH AND LIFE SCIENCES DEALS
• Tot Biopharm, a China-based maker of anti-tumor drugs, raised $102 million in Series B funding. Investors include China Universal (Cayman) GP Limited, Center Laboratories Group, Vivo Capital, Chengwei Capital, Yuanta Financial Holdings Group and Cathay Capital.
• Artios Pharma Limited, a U.K.-based DNA damage response company developing treatments for cancer, raised $84 million in Series B funding. Andera Partners and LSP co-led the round, and was joined by investors including Pfizer Ventures, Novartis Venture Fund, Arix Bioscience, SV Health Investors, M Ventures, IP Group plcand AbbVie Ventures.
PRIVATE EQUITY DEALS
• KKR will acquire a 60% stake in Ramky Enviro Engineers Limited, a provider of environmental services and solutions in India and overseas, for approximately $530 million via a combination of primary and secondary investments valuing the company at an enterprise value of $925 million.
• ISA Fire and Security, a portfolio company of Align Capital Partners, merged with ABCO Fire Protection, a Lubbock, Texas-based provider of fire safety and security system inspection. Financial terms weren’t disclosed.
• ACON Investments LLC agreed to buy Goody Products Inc, an Atlanta-based maker of hair styling tools. Financial terms weren’t disclosed. Newell Brands was the seller.
• Gores Holdings III, a Beverly Hills, Calif.-based blank check company, filed for a $375 million IPO of 37.5 million units priced at $10 apiece. Gores Group backs the company. Deutsche Bank is underwriter in the deal. It plans to list on the Nasdaq as “GRSHU.” Read more.
• Weidai, a Hangzhou China-based car loan platform, filed for a $100 million IPO. The company posted revenue of $535.8 million in 2017 and earnings of $71.8 million. Morgan Stanley, Credit Suisse and Citi are underwriters. It plans to list on the NYSE as “WEI.” Read more.
• Astellas Pharma acquired UK-based Quethera, a U.K.-based gene therapy company. Astellas may pay up to 85 million pounds ($108 million) to Quethera shareholders. Quethera was backed by UK Innovation and Science Seed Fund and Cambridge Enterprise.
• Rock Gate Partners agreed to sell Walpar, a Birmingham, Ala.-based provider of overhead sign structures, to Valmont. Financial terms weren’t disclosed.
• Calen Angert and Nicholas Leppla have re-joined TA Associates as vice presidents.
• Richard Siege joined Sixpoint Partners as a vice president.