Tuesday, 23 April, 2019

Elon Musk tweets about going private and shares 'skyrocket'

Elon Musk at a Tesla Elon Musk has been embroiled in a war of words on social media with critics of the electric car company
Ginger Lawrence | 08 August, 2018, 05:00

Musk's first tweet said funding was "secured" for a transaction that could value the company at US$420 a share.

Separately, the Financial Times reported on Tuesday that Saudi Arabia's sovereign wealth fund, overseen by Crown Prince Mohammed bin Salman, has built an undisclosed stake of 3-5% in Tesla. He went on to say wild swings in the company's stock price can be a "major distraction for everyone working at Tesla, all of whom are shareholders".

The founder and largest shareholder of Tesla has had a history of taking shots at traders who bet against his money-losing electric-car maker through his Twitter account, where he has 22 million followers.

Gene Munster of Loup Ventures, said Tuesday that Musk's tweet could fall within the guidelines of the SEC as long as investors have been alerted. It's not clear Musk has the funding to complete the deal, and he would need a majority of shareholders to agree to the plan. Following Musk's initial tweet trading in Tesla Inc was briefly suspended, but ended at $380 (£296) a share, which was close to a record high.

Often his erratic behaviour has drawn more attention than his struggles to shift Tesla from a niche luxury auto maker into a mainstream automotive company.

Musk's tweets, though, might present a bigger problem. It zoomed as high as $371 per share before trading was halted at $367 per share just after 2 pm EDT. "This is not how you do it and it makes you wonder how seriously to take it", said Erik Gordon, a business and law professor at the University of MI. (Easy come, easy go.) More importantly, were Musk able to take Tesla from a publicly to privately owned company, Tesla would be worth about $71 billion, roughly the same as century-old Daimler, parent of Mercedes-Benz.

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Musk has cut a controversial figure on social media and beyond, apologising last month for calling British caver Vernon Unsworth, who helped rescue 12 Thai boys from a cave a "pedo", short for paedophile, after Unsworth spoke dismissively of the Tesla chief's proposal for bringing the boys to safety. He indicated that taking the company private would allow Tesla to focus on long-term ambitions and remove "perverse incentives for people to try to harm what we're all trying to achieve".

Tesla has been public since it filed an IPO in 2010. The California auto maker has burned through US$1.8-billion in the first half of 2018 and is among the most-shorted stocks on the USA markets.

But another substantial segment of investors are convinced Tesla is doomed to fail and are betting on the company's eventual demise by becoming "short sellers" of its stock. They'll have an option to sell at $420 per share or to hold onto their shares and become shareholders of the new private company.

Musk and other investors may want to thank Netflix CEO Reed Hastings for these rules, which followed a Facebook post by Hastings in 2013 detailing key subscriber data.

Musk's target for taking the company private would value it at more than $82 billion, according to Bloomberg. "He will live to see another day".