Questions and legal concerns mount over Elon Musk’s bombshell Tesla buyout tweet

12 August, 2018, 11:58 | Author: Mary Valdez
  • Tesla CEO Elon Musk has offered no evidence to back up a tweet stating he had “funding secured” to take the company private.
David Paul Morris  Bloomberg

Tesla stock surged more than 10% Tuesday after CEO Elon Musk said he was considering taking the company private.

Musk's proposal to buy out Tesla shares at $420 per share could put the total buyout at around $72 billion.

David Whiston, an equity strategist at Morningstar who covers the U.S. auto industry, said he was confused by Musk's tweets, which he said indicated Musk had both the funding and the shareholder votes necessary to take the company private.

USA regulators are asking Tesla why Musk announced his plans on Twitter and whether his statement was truthful, the Wall Street Journal reported on Wednesday.

The stock was down most of the day, and dipped more after a Bloomberg report that the SEC had been gathering information on Tesla prior to Tuesday.

The anonymous sources said Tesla's board is likely to develop a special committee made up of a smaller number of independent directors to review buyout details. "Funding secured", Musk said on Tuesday via Twitter before issuing a formal statement on Tesla's website. The analysts stated that Tesla's plan to go private continues to remain "unknowable," partly due to the "vague verbiage" used to describe it which means that "the deal is unlikely to succeed in the very near-term, if it succeeds at all".

The agency declined to comment and Tesla did not immediately respond to requests for comment. Tesla is and probably always will be a company that will remain underneath the spotlight, so nearly any actions taken by the company itself or Elon Musk as an individual or CEO will have adverse effects on its stock price.

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It now has a market value of $61 billion, and at a share price of $420, the company would be worth around $71.6 billion.

Over the past few weeks and months, Tesla and more specifically CEO of Tesla Elon Musk have been in the news quite a fair bit, and a good amount of that press hasn't been exactly positive. It is not clear if PIF is interested in financing Mr Musk's proposed take-private deal.

Musk has long battled publicly with short sellers of the stock.

Is Elon Musk's sensational tweet legal?

Musk has also said on multiple occasions that Tesla will become profitable by the end of this year and won't need to raise additional funds, despite its increased cash-burn rate in recent quarters.

I don't tweet often and, for the life of me, I don't understand why serious people, in the most consequential positions, choose Twitter as their medium to communicate breaking news.

According to UK's the Guardian, this new valuation would float his company from its current stock market value of $63.8 billion to a whopping $82 billion, a near $20 billion inflation. And most of the perceived advantages of being a public company - higher profile, greater brand awareness, better access to capital - don't apply to Musk and Tesla.

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