Elon Musk Almost Sold Tesla To Google

APR 22 2015 BY TDILLARD 19

It’s the big buzz all over the internet in the last day or two, that sometime around March, 2013, Musk was close to inking a deal with Google.

This all came from the new, long-awaited book arriving May 19th, Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future (Ashlee Vance), which, though due out in May, the Bloomburg Business site posted this excerpt from: (edited)

On May 8, 2013, Tesla Motors shocked just about everyone by posting its first-ever quarterly profit, …The 2013 profit announcement was fortuitous. Just weeks before, Tesla had been on the verge of bankruptcy.

Earlier in 2013 (Musk) … began negotiating a deal to sell the company to Google through his friend Larry Page, the search giant’s co-founder and chief executive officer…

     List Price: $28.99     Save: $7.85 (27%)     Pre-order Price Guarantee. FREE Shipping on orders over $35. This title will be released on May 19, 2015. Ships from and sold by Amazon.com. Gift-wrap available.  Yes, I want FREE Two-Day Shipping with Amazon Prime Pre-order: Add to Cart Turn on 1-Click ordering for this browser Want to receive this the day it comes out? Select Two-Day Shipping at checkout. Ship to: Edward Dillard Add to Wish List See this image Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future, due out May 2014

Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future, due out May 2015

A big part of the problem was a lack of resources, says former Tesla engineer Ali Javidan. “It was either hire a team of 50 people right away to make one of these things happen, or implement things as best and as fast as you could.” Musk chose the latter, Javidan says. …

In the first week of March 2013, Musk reached out to Page, say the two people familiar with the talks. By that point, so many customers were deferring orders that Musk had quietly shut down Tesla’s factory. Considering his straits, Musk drove a hard bargain. He proposed that Google buy Tesla outright — with a healthy premium, the company would have cost about $6 billion at the time — and pony up another $5 billion in capital for factory expansions. He also wanted guarantees that Google wouldn’t break up or shut down his company before it produced a third-generation electric car aimed at the mainstream auto market. He insisted that Page let him run a Google-owned Tesla for eight years, or until it began pumping out such a car. Page accepted the overall proposal and shook on the deal.

In the weeks that followed, Musk, Page, and Google’s lawyers negotiated the specific terms of the deal. There were a couple of sticking points around Musk’s financial demands that complicated the talks and kept the two sides apart.

While the two companies were negotiating, Tesla’s frenzy of sales calls began to pay off, and a lot more people started buying the Model S. With its quarter drawing to a close and two weeks worth of cash in its coffers, Tesla began selling thousands of cars, enough to post an $11 million quarterly profit on $562 million in revenue.

Within two weeks of that announcement, the company’s shares had doubled, and Tesla had repaid its $465 million loan from the U.S. Department of Energy early, with interest. Musk broke off his negotiations with Google. He no longer needed a savior.

Be sure to see the Bloomberg story for an interesting commentary.  Also, don’t miss the story on The Motley Fool, where the Fool advises:

Tesla is better off
While a $6 billion price tag on Tesla may have made sense at the time, Musk and Tesla shareholders have seen a far better return as an independently operated company than would have been the case if the Google and Tesla deal panned out. Today, Tesla’s market cap is $26 billion.

The near-Google deal highlights the risk of investing in companies like Tesla who spend every dollar of gross profit on expansion. Even amid sales growth, cash can be tight. Of course, the risk of bankruptcy today is far lower, if not nonexistent. Tesla’s premium stock price, paired with a much better track record of demand for its vehicles, gives the company much easier access to capital today — whether it’s through debt or equity.

What’s really interesting is that Bloomberg posted this post-Tesla turnaround story in June of 2013, still talking about a Google purchase:

Categories: Tesla

Tags: ,

Leave a Reply

19 Comments on "Elon Musk Almost Sold Tesla To Google"

newest oldest most voted

Bloomberg’s Ashlee Vance’s book, “Elon Musk: Tesla, Space-X And The Quest For a Fantastic Future” details the deal and Musk himself does not deny it.

It’s both scary and exciting how, “edge of the seat of his pants” Musk has dealt with Tesla. I mean – here he is disrupting the entire established auto industry – and at every turn he seems to over-extend or just fly by faith financially to see his electric transportation dream into reality.

I was shocked at this news. It brought those pictures of Model X mules with huge gaps around the Falcon Wings to mind. What if Model X kills Tesla? Will the Gigafactory ever produce giga-batteries? It keeps me up at night, sometimes. It’s a thrill ride for sure – and I’m fascinated how Musk still tried to hold tight control on his company even after letting it go. Most interesting to me is his priority of building Model III.

Make it so – Number One.

I’m not shocked at all. You need to understand Page is a friend. The “sale” would have been a way for Page to give Musk a lot of Google’s money without being lynched by his board. Understand that Google, in its IPO prospectus, clearly stated that they would invest money in things with or without profit potential. Basically it says that they will do whatever they want, take it or leave it. This says several things. The most important is that Musk is operating within a Silicon Valley context with big pockets on tap in case of emergency. He is not isolated like Preston Tucker was. There is a plan B, and probably a plan C as well. This is why shorts are doomed, at least those who expect a collapse. Short-term shorts will make money of course on drops, but those holding on to the David Stockman view are delusional and lack insight into the Valley ecosystem and Musk’s place in it. If not Google, then Apple, or Peter Thiel, or who knows. Tesla is simply not going down without an exceptional series of highly negative events (think cold fusion invented by GM while at the same time a… Read more »

You may be right. I certainly hope you’re right. It’s measured speculation, and I hope Silicon Valley does stick together like that. If so, good luck, Detroit in breaking up Tesla before it’s primary goals are met.

This is good for America, and good for our world. Old School industrials should not be able to quash progress and evolution for mankind. They’ve done it before. You mentioned Tucker and I’ll encourage you to look up how they broke up the electric trolley systems throughout America, also.

Please mention the source. Ashlee Vance wrote a book about Elon Musk, and before the book release he teased this detail.

After listening to an interview on Bloomberg, where he talked about mass Tesla defection of early Tesla owners, and bad word of mouth, even though the forums dating back to 2013 do not mention any such issues, count me skeptical of Ashlee Vance. Also, Tesla would sell to Google right before they would have the first profitable quarter? Fishy.

Hey Daniel,

You might have just missed it, but we mentioned the book name…and a link to purchase the book in the second paragraph. We didn’t note that it wasn’t available until May 19th though – I’ll add that into Ted’s article now, in case people are looking to pick up a copy today.

***mod edit (Jay Cole)***
Ah, yes…I see what you were getting at. Not that we didn’t attribute, but to consider the source of the book. Sorry about that, our bad, (=
***mod edit (Jay Cole)***

Wait, what?

Daniel isn’t saying he’s interested in the book at all, or on his list. He’s saying the author is fishy.

I, too, “missed” any mention back in the day (early 2013) that a significant number of people were “deferring” (postponing) their Model S orders. What the heck is he talking about? And the idea that the factory could be “quietly” shut down, without word leaking out… the Tesla bashers would have been shrieking in triumph!

So, that’s two more things that lead me to think Ashlee Vance is more interested in telling an interesting story than in sticking to the truth.

Larry Page would’ve probably just run Tesla into the ground trying to make a car that autonomously drove you to work, make you a latte and gave you a foot massage.

Hopefully Page and others will kick themselves for not bending to Musk’s demands, as Tesla becomes worth hundreds of billions and the most significant, groundbreaking car company of our lifetime.

Page would have done nothing of the sort. The negotiations, assuming this story is true, were probably dragged out while Musk was figuring out if he could survive without the sale. At the point where the would have been no money to pay the bills, Musk and Page would have settled it in 30 minutes.

Right. My comment was tongue-in-cheek. But it does seem unlikely that Google then would’ve kept it’s autonomous drive skunkworks completely separate from it’s Tesla business.

While perhaps most or all of what’s asserted as fact in the book may be true, I seriously question the interpretation -of- those facts as described by Ashlee Vance. For example, the numerous “strings attached” which Musk is described as putting in the proposed deal with Google certainly make it sound like Musk was at least quite ambivalent about selling the company, and causes me to question whether or not Musk was making a serious proposal. Perhaps this was more of an exploratory exercise: “-If- I were willing to sell the company, what could I get for it?”

Let’s keep in mind that authors who write “tell-all” books often spice up the content to get people to talk about their book, and thus sell more copies. I’m not accusing Ashlee Vance of stretching the truth; merely pointing out he has a conflict of interest when it comes to sticking to a “Just the facts, Ma’am” narrative.

Good points. Food for thought dept..

Entering negotiations in bad faith is not without risk, not the least of which is that the story will eventually leak. So either Musk was reckless or there were serious financial problems at Tesla.

You may be right. The key interesting detail here (if true) is the condition “He also wanted guarantees that Google wouldn’t break up or shut down his company before it produced a third-generation electric car aimed at the mainstream auto market. He insisted that Page let him run a Google-owned Tesla for eight years, or until it began pumping out such a car. Page accepted the overall proposal and shook on the deal” Much more typical is the reverse: The acquiring company insists that the acquired company’s senior management stay on for at least a year for a smooth transition (I’ve been in companies that got acquired twice, in multi-$M deals (one a multi-$B semiconductor division, one a 100[person startup), and this was the case in both). Musk’s conditions above meant in effect that Google would have virtually no control over Tesla for 8 years… It couldn’t be shut down or spun off and he couldn’t be fired for 8 years. A completely unreasonable demand from a public company — shareholders could change, so I expect this could have been legally challenged and it wouldn’t have stood up in court. And esp. in the tech sector, where things can change… Read more »

Well, Google is publicly owned in theory, but its really Larry and Sergei’s, and in their IPO prospectus they made sure Google had the right to invest money in anything, even with no expectation of profit at all. This is actually in writing.

Really, it’s like Tesla, and Amazon for that matter, and Apple for many years as well. Companies for like-minded investors where the founder-CEO is free to do nearly whatever they want. A lot of Silicon Valley works this way. The notion was reinforced by Steve Jobs getting fired, which was disastrous for Apple. So boards are tightly controlled and founders have to make really, really bad mistakes to be ousted.

The founder may have a lot of control… until s/he doesn’t — once the company’s public, shares are freely trsded. What an IPO prospectus says doesn’t matter, and neither do the articles of incorporation. The board may always change those.
However, a civil contract, and an acquisition is such, is normally binding, and most likely one with such conditions would be struck down if challenged by minority shareholders.

The caption to the book reads May 2014 instead of 2015.

(Musings – Something is not right in Electric Fueled Vehicle history land) Reflecting on statements and excerpts from a book by Ashlee Vance, a technology writer for Bloomberg Businessweek, I think that I will crank up the Cyber time machine. Any of you can do this before you post a single word in this or any other comment section. 05.09.2013 “While Musk said an acquisition isn’t expected to happen soon, he was willing to spitball some hypotheticals with an editor and me. What about another car company? Daimler and Toyota Motor are already Tesla investors. “From the perspective of a large [automaker], Tesla just seems very expensive,” Musk said. “How many cars do we make? What’s our market cap? It seems nutty to them.” OK, how about Apple? “They do have a lot of cash,” Musk said coyly. “I’d guess it would come from outside the auto industry. It would be a buyer with a very large cash position.”” — “Musk won’t be able to sell Tesla until the company repays its debt to the U.S. Energy Department, which it expects to complete by December 2017. (Ed- Pd In Full – 05.22.2013) Rather than seeking a sale, Musk’s priorities for… Read more »