Tesla (TSLA) announced Tuesday that it's formed a special committee to consider CEO Elon Musk's controversial proposal to take the company private. Don't be surprised when this group rubber-stamps the plan.
It's important to note that this three-person committee -- and not Tesla's full board of directors -- has the ability to determine whether to take the company private or not. Essentially, the company has elevated certain board members above the rest by placing the decision in their hands.
"The special committee has the full power and authority of the board of directors to take any and all actions on behalf of the board of directors as it deems necessary to evaluate and negotiate a potential going-private transaction," Tesla said in a statement announcing the move. "The special committee's grant of authority provides that no going-private transaction will be consummated without the approval of the special committee."
Did Musk feel that he'd receive pushback on his take-private idea from some regular board members? If so, empaneling a special committee to handle the plan would give him a mechanism to circumvent such dissent.
What criteria did the company use in selecting committee members? Was loyalty to Musk a factor? Were some board members excluded because they weren't willing to play along?
Personally, I won't surprised to see this group OK the take-private proposal. In fact, the only real drama to me is whether Musk truly has the financial backing that he claims it does (or if not, whether he can quickly obtain it).
What Technical Analysis Tells Us
Perhaps Tesla's chart can provide some insight. We can see from the chart below that TSLA has formed a "symmetrical triangle" (the black lines below):
This is a consolidation pattern, and it tells us that the stock is "digesting" its prior gains. However, this pattern has no directional bias -- if the price breaks upward, traders normally buy, and if it breaks downward, they tend to sell.
Tesla is inching down toward the triangle's lower end, but I wouldn't draw any conclusions from that unless we see a definitive move in that direction.
What Were You Thinking, Elon?
So, perhaps the real question we should be asking is: "Why are we having this discussion at all?"
Companies normally decide behind closed doors whether go private. Shareholders just wake up one day and hear the news -- game over, no tweets, no drama.
However, we know that Musk has a burning desire to barbecue Tesla's short-sellers. But ironically, he could have done so much more effectively if he'd simply kept his mouth shut.
Imagine the shorts waking up one day to the news that Tesla, without any warning whatsoever, was going private at $420 a share. That would've been devastating to them.
Instead, there's now plenty of time for shorts to reconsider their positions and to hedge with options. The element of surprise is gone.
(This column originally appeared at 1:28 p.m. ET on Real Money Pro, our premium site for active traders and Wall Street professionals. Click here to get great columns like this even earlier in the trading day.)