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Aug 23, 2018

Elon Musk hires Morgan Stanley to help take Tesla private

Elon Musk May 2018

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Elon Musk has hired Morgan Stanley (MS.N) to assist him in his potential bid to take Tesla Inc. (TSLA.O) private, according to a person familiar with the matter.

Morgan Stanley is advising Musk, not the company, its board or a special board committee formed to to evaluate a potential take-private proposal, said the person, who asked not to be identified because the matter is private. The bank suspended coverage of the stock on Tuesday without explanation.

Musk, 47, shocked the financial world Aug. 7 when the chief executive officer tweeted that he wanted to take the electric-car maker private and had “funding secured.” In a blog post, he later indicated that no such financing deal had been closed. The tweet has drawn a subpoena from the Securities and Exchange Commission, according to a person familiar with the matter.

By adding Morgan Stanley to Goldman Sachs Group Inc., Musk has tied up the top two merger advisers in the U.S. this year. Both banks have been lead underwriters on most of the company’s stock and convertible debt offerings. Morgan Stanley is among Tesla’s 20 largest shareholders, with a 0.6 per cent stake. Its Tesla analyst, Adam Jonas, has historically been one of the more bullish researchers of the stock.

“The hiring of Morgan Stanley and GS is unfortunate for investors wanting to take a long-term view of holding the stock,” said Jim Osman, CEO of The Edge Group, which analyzes special situations. “Many funds and investors won’t be able to participate should the stock go private. Whilst we are a fan of Musk, GS and MS will have to think of something very creative to let the investors share in any future value creation.”

The Palo Alto, California-based automaker didn’t immediately respond to a request for comment. A spokesman for Morgan Stanley declined to comment.

Tesla shares slipped 0.5 per cent to close at US$320.10 in New York trading. After a roller-coaster month in which they soared to almost US$380 before falling back below US$300, they are up 2.8 per cent this year, best among U.S. automakers.

Morgan Stanley and Goldman Sachs have longstanding ties to Musk, who is also CEO of Space Exploration Technologies Corp. as well as Tesla’s chairman and largest shareholder. As of February 2017, Musk owed Morgan Stanley US$344.4 million in personal loans backed by his Tesla shares.

Musk tweeted last Monday that he would be advised by Goldman Sachs and by private-equity firm Silver Lake. But he hadn’t formally hired Goldman yet, people familiar with the matter said on Tuesday. By the next day, Goldman announced that it suspending coverage of the stock because it’s acting as a financial adviser “in connection with a matter that is fundamental” to the company’s value.