THE ELON MUSK SHOW
Good morning Term Sheet readers, and welcome to another day of the Elon Musk Show.
Nearly three weeks ago, Tesla CEO Elon Musk told the world he was considering taking his electric vehicle company private. Minutes later, chaos ensued, shares rose, and frantic reporters scrambled to figure out what was going on.
Musk later published a letter explaining that he believed taking Tesla private “could be good for our shareholders, enable Tesla to operate at its best.” In a startling reversal, he made a surprise announcement on Friday night that he now believes “the better path is for Tesla to remain public.”
Why? Musk outlines several reasons, including the time-consuming and distracting process required to take the company private as well as shareholders’ overall sentiment of “please don’t do this.” (I highly doubt their sentiment was that polite.) And oh, how about the fact that he would have to cede considerable control to large, private investors (ie: Saudi Arabia, a symbol of big oil) while shutting out smaller investors who might be unable to retain a stake?
A few notes on Musk’s brazen reversal:
• Just kidding: Musk was reportedly motivated to tweet out of frustration with the frequent shorting of the company’s stock, but some are wondering whether this was all a joke gone too far. Was Elon simply trolling Tesla short sellers, and was then forced to follow-through after things got serious? The SEC can make that call.
• Leadership concerns: Musk’s sudden backtracking has raised new questions about his leadership. Jeffrey Sonnenfeld, a professor at the Yale School of Management, told The New York Times, “Tesla investors must realize that they have a panicky, erratic, possibly self-destructive C.E.O. at the helm. No C.E.O. is ever this confused and confusing.” As outlined in this emotional interview, his lack of sleep, the toll on his health, and the mounting stress paint a picture of a CEO struggling to keep his company (and his sanity) under control.
• Now, what? I mean, who knows really? One thing that’s for certain is that Musk is under tremendous pressure to deliver, now more than ever. And it won’t be easy. Tesla’s stock price dipped on Monday morning following the announcement. In his letter, Musk noted that “we absolutely must stay focused on ramping Model 3 and becoming profitable.” Well…yeah. If Musk was frustrated by the quarterly earnings cycle before because it put “enormous pressure on Tesla,” then thanks to this fiasco, the company should expect to undergo even more intense scrutiny.
…IN RELATED NEWS: Sarah O’Brien, Tesla’s vice president of communications, is leaving the company after nearly two years, according to Bloomberg. Plans for her departure reportedly precede the recent events around Musk’s attempt to take Tesla private. I genuinely wonder what that role entailed given that Musk is so often the public voice of the company through his Twitter account.
THE LATEST FROM FORTUNE…
• Streaming Could Change the Video Game Business Forever (by Chris Morris)
• Q&A: Rapid7 CEO Corey Thomas on Cybersecurity, Privacy, and the Corporate World’s Challenges (by Aaron Pressman)
• Why Even the Best Corporate Leaders Can Be Replaced, Intuit Edition (by Adam Lashinsky)
• Uber Plans Shift to E-Bikes and Scooters for Short, Inner-City Rides (by Natasha Bach)
• PebblePost, a New York City and San Francisco-based martech startup that sends direct mail programmatically, raised $25 million in Series C funding. Advance Venture Partners led the round.
• Armory, a San Mateo, Calif.-based provider of a platform that automates software delivery, raised $10 million in Series A funding. Crosslink Capital led the round, and was joined by investors including Bain Capital Ventures, Javelin Venture Partners, Y Combinator and Robin Vasan.
• RXQ Compounding LLC, an Athens, Ohio-based outsourcing facility that produces medical formularies and medications, raised ~$3.6 million in funding from Advantage Capital.
• Altum Technologies, a Finland-based industrial equipment supplier, raised Series A funding of an undisclosed. Maki.vc led the round, and was joined by investors including Lifeline Ventures.
HEALTH AND LIFE SCIENCES DEALS
• Harbour BioMed, a China-based biopharmaceutical company, raised $85 million in Series B funding. GIC Private Ltd led the round, and was joined by investors including China Life Private Equity Investment Co, Vertex Ventures, AdvanTech and Legend Capital.
PRIVATE EQUITY DEALS
• Trivest Partners acquired GAL Power Systems, a Canada-based provider of power and temperature control solutions. Financial terms weren’t disclosed.
• Pamlico Capital made a growth equity investment in Airwavz Solutions, Inc, a Charlotte, N.C.-based provider of in-building wireless infrastructure. Financial terms weren’t disclosed.
• DW Healthcare Partners sold PRIME Education, a Fort Lauderdale, Fla.-based medical education company, to a strategic buyer. Financial terms weren’t disclosed.
• Berkshire Hathaway Inc is in talks to invest about 20-25 billion rupees ($285.4-356.7 million) in One97 Communications Ltd, the India-based parent of digital payments firm Paytm. Read more at Fortune.
• Arco Platform, a Sao Paulo, Brazil-based education firm, filed for a $100 million IPO. It booked revenue of $63.4 million in 2017 and earnings of $11.5 million. Goldman Sachs, Morgan Stanley, Itau BBA, and BofA Merrill Lynch are underwriters. It plans to list on the Nasdaq as “ARCE.” Read more.
• Y-mAbs Therapeutics, a New York-based developer of monoclonal antibody therapies for pediatric cancer, filed for a $92 million IPO. It has yet to post a revenue.
• WG Biotech ApS (17.8% pre-offering), Memorial Sloan Kettering (9.8%), and HBM Healthcare Investments (8.9%) back the firm. BofA Merrill Lynch and Cowen are underwriters. It plans to list on the Nasdaq under the symbol “YMAB.” Read more.
• Bank7, an Oklahoma City, Okla.-based operator of regional bank branches, filed for a $75 million IPO. It posted interest income of $42.9 million in 2017 and net income of $23.8 million. Keefe Bruyette Woods, Stephens Inc., and Sandler O’Neill are underwriters. It plans to list on the Nasdaq as “BSVN.” Read more.
• Advance Publications Inc agreed to acquire Stage Entertainment, a Netherlands-based theater producer and owner, from CVC Capital Partners and Joop van den Ende. Financial terms weren’t disclosed.