Saturday, 18 August, 2018

Did Elon Musk violate securities regulations with his bombshell tweet?

Elon Musk tweet 'Am considering taking Tesla private at $420. Funding secured' Elon Musk is the chairman and CEO of Tesla
Kelvin Reese | 08 August, 2018, 08:28

As a direct result of Musk's $420 tweet, share values started fluctuating.

The stock since settled at $US366.94 before exchanges halted trading, pending an upcoming announcement from the company. Investors have also applauded Mr. Musk's efforts to rein in spending and boost Model 3 production to 5,000 vehicles a week, in part by running production lines inside a giant tent on the grounds of Tesla's Freemont, Calif., factory.

However, he concedes Musk has good reason to take Tesla off the public markets, and he's established precedent through SpaceX and The Boring Company.

Tesla has been the subject of a number of short sales by investors - who feel the money-losing company doesn't have a path to profitability and that its shares will tumble.

The billionaire Musk, who owns about 20 per cent of the company, said a transaction would not "substantially" alter his stake and that he expected to continue to lead the company if it occurred.

Shares were pummeled in May after Musk abruptly cut off questions from Wall Street analysts over Tesla's spending plans.

In his blog post, Musk emphasized that the intention was not to merge SpaceX and Tesla, a strategy that some have speculated about in the past.

Going private is one way to avoid the intense scrutiny of public markets.

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Shares in Tesla opened at $343.84 before hitting a high of $371.15 around mid-day on the news.

Representatives for the Saudi fund weren't immediately available for comment on the investment, which the Financial Times first reported earlier Tuesday. Shares jumped in Tuesday trading following reports that the Saudi Arabian sovereign wealth fund took a $2 billion stake in the company earlier this year.

Tesla chief executive Elon Musk is gearing up to lead a buyout of the electric auto maker in a stunning move that would end the maverick company's eight-year history trading on the stock market.

Musk has also clashed repeatedly with critics, especially investors who have taken short positions on the stock, meaning they benefit when the price falls.

"His mission for Tesla (to accelerate the globe's adoption of sustainable energy) is both grand and long-term, making it hard to accommodate investors quarterly expectations", he wrote. The company had a market value of $58 billion as of Monday's close. Prices seesawed in the range of $360 to $370, a roughly 7 to 8 percent rise for the day, while investors tried to decide whether Musk was joking.

To announce a privatization plan in a series of tweets is unusual, to say the least. He added that in the future, when Tesla reached a "phase of slower, more predictable growth", the firm could go public again. The switch would mean that shareholders could no longer freely sell their shares on the open market, but Musk said that employees-and potentially other shareholders-would still receive periodic opportunities to cash out.

"Our guess is there is a one-in-three chance he can actually pull this off and bring Tesla private", Munster said.

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