Tesla Slides On Report It Is Only Now Approaching Potential LBO Investors

It looks like Elon Musk lied when he said that the "funding was secured."

Assuring that the SEC will have its hands full, Bloomberg reports that only now are Elon Musk and his merry advisers men seeking a "wide pool" of investors to back a potential take-private of the automaker to avoid concentrating ownership among a few new large holders, according to people familiar with the matter.

Furthermore, quite contrary to even the loosest definition of "secured", BBG adds that Tesla is holding early discussions with banks about the feasibility and structures of a possible deal, citing sources, and only now is it canvassing investors including large asset managers.

It's not immediately clear how any of this is different from simply doing a follow on offering of public stock, one which takes out existing small shareholders, especially since Tesla would always have publicly filing (junk) debt as the core component of its capital structure, and thus instead of trading the stocks, those evil shorts would be buying CDS on the company instead.

Always a chooser and never a beggar, in addition to getting investors to allocate funds to a company that would have an idiotic pro forma leverage, Musk also hopes to retain control and "would prefer to amass a group of investors who could each contribute part of the funds because he wants to avoid having one or two large new stakeholders in the company." Which immediately kills either SoftBank and the Saudi Sovereign Wealth Fund as potential investors. It also prompts the question: does Musk even know what going private means?

Most troubling, and where the SEC should immediate chime in, is that according to the report deliberations are only at an early stage and the company hasn’t yet formally hired a bank to work on the process or made a final decision on how to proceed.

As a reminder, since Musk first tweeted on Tuesday that he was considering taking Tesla private at $420 a share and that he had “funding secured,” he’s offered no evidence to back up the statement. People close to at least 16 financial institutions and technology firms, who spoke on the condition of anonymity, have said they weren’t aware of financing having been locked in before Musk’s tweet.

Meanwhile, even as the SEC is about to have a field day digging into Musk's 10b-5 violation, several banks are already pitching possible deal structures or financing scenarios - now that they know what Musk is looking for - for either Tesla or the company’s board to consider, chasing the millions of dollars in advisory fees that could be offered to whomever wins the mandates.

According to estimates from Jeffrey Nassof, a director at Freeman Consulting Services, banks advising Tesla could make $90 million to $120 million in fees, while advisers to Musk could take home $30 million to $50 million. If a deal involves debt financing, those providing funding could expect fees of about $500 million.

And now that the company has admitted that there was no deal, no term sheet, no agreement, we will look closely at the what the SEC does next in light of what appears to have been a glaring securities manipulation. TSLA stock promptly slumped on the news.