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Tesla board moves to explore going private, and shareholders sue over Elon Musk's tweet

Tesla board moves to explore going private, and shareholders sue over Elon Musk's tweet
Tesla Model 3 sedans sit on display outside a company showroom in Littleton, Colo., in July. (David Zalubowski / Associated Press)

Tesla Inc.’s board of directors said Tuesday it was forming a special committee to explore Chief Executive Elon Musk’s desire to take the Palo Alto electric carmaker private even as at least three shareholder lawsuits have been filed alleging he made false and misleading statements about the effort.

And in keeping with the uncertainty that has surrounded the buyout plan from the start — Musk tweeted last week that he had “funding secured” despite there being no firm deal in place — questions arose Tuesday about whether two financial firms were working as advisors to him.

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The committee of three independent directors “has not yet received a formal proposal from Mr. Musk” to take the public company private “nor has it reached any conclusion as to the advisability or feasibility of such a transaction,” Tesla said in a statement.

A final decision to proceed with a buyout will require approval by the committee, which has full power to “evaluate and negotiate” a potential transaction, Tesla said.

The committee members are Brad Buss, a retired executive at SolarCity Corp. and several other tech firms; Robyn Denholm, chief operations officer at telecom firm Telstra Corp.; and Linda Johnson Rice, chief executive of Johnson Publishing Co.

Musk roiled Tesla and its stock last week by saying on Twitter that he was “considering taking Tesla private” and that he had the funding to do so at $420 a share.

The Aug. 7 tweet caused Tesla shares to jump 10% that day, but then they declined the rest of the week as questions arose about the likelihood of a deal and whether Musk had violated securities laws by making the public comments.

Tesla stock fell 2.5% Tuesday to $347.64.

The board announcement and a tweet from Musk showed Tesla moving full speed ahead on looking into whether to take Tesla private.

The board’s special committee has retained the Latham & Watkins law firm as legal counsel and plans to hire an independent financial advisor to help review any formal proposal. Tesla also said it has retained the Wilson Sonsini Goodrich & Rosati law firm in connection with a possible going-private move.

Musk tweeted Tuesday he was “excited” to work with Silver Lake, a technology private equity firm, and investment bank Goldman Sachs Group as financial advisors on the privatization proposal, as well as two law firms — Wachtell, Lipton, Rosen & Katz and Munger, Tolles & Olson — as legal advisors.

But Reuters quoted an unnamed source as saying Silver Lake was offering unpaid assistance and had not officially been hired as a financial advisor. Separately, Bloomberg cited unnamed people as saying Goldman Sachs hadn’t formally signed on as a financial advisor.

At least three class-action suits have been filed against Tesla on behalf of company shareholders alleging the company and Musk violated securities laws by making “false and misleading statements” about the going-private funding. Those statements caused investors who owned the stock from Aug. 7 to Aug. 10 to lose money as Tesla’s share price declined after the initial jump, the suits allege.

“When this fraud began to be disclosed, investors in the company’s securities were harmed,” said a statement from the Scott and Scott law firm in San Diego after announcing its federal suit.

The Schall Law Firm in Los Angeles said Monday that it had filed one of the suits, noting reports that the Securities and Exchange Commission was looking into Musk’s statements.

“Both the SEC and Tesla’s board of directors are reportedly investigating Musk’s tweets on the matter,” the firm said in a news release. Because of that, Tesla’s “public statements were false and materially misleading” and “when the market learned the truth about Tesla, investors suffered damages.”

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The other suit was filed Friday by Seattle-based law firm Hagens Berman Sobol Shapiro.

Musk said in a blog post Monday that his tweet last week about having “secured” funding to take Tesla private was based on meetings with Saudi Arabia’s sovereign fund that left him “with no question” that they could strike a deal.

No deal has been completed. Musk said he would present a more complete financing plan later.

“I continue to have discussions with the Saudi fund, and I also am having discussions with a number of other investors,” he said. “It is appropriate to complete those discussions before presenting a detailed proposal to an independent board committee.”

2:40 p.m.: This article was updated with information about a third class-action suit and about advisors to Tesla and Elon Musk, and with Tesla’s stock movement.

This article originally was published at 8:55 a.m.

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