Elon Musk’s Tesla Claim Could Land Him in Regulatory Trouble

Elon Musk at a Tesla

Shares of Tesla saw an abrupt halt on Tuesday afternoon after CEO Elon Musk shared a series of tweets about possibly taking the company private.

The billionaire Musk himself owns a bit more than 20 percent of Tesla stock. The company had a market value of $58 billion as of Monday's close.

Trading of Tesla sharesresumed after the company published the statement and the stock closed at $379.57, up almost 11 percent for the day.

Some observers initially derided Mr. Musk's plan to take Tesla private at $420 a share as a marijuana joke - 420 is a euphemism for April 20, a popular annual cannabis celebration.

Earlier in the day, the Financial Times reported that Saudi Arabia's sovereign wealth fund, overseen by Crown Prince Mohammed bin Salman, has built an undisclosed stake of between 3 and 5 per cent stake in Tesla. In his blog post, he said the shorts had "perverse incentives" for trying to harm the company. It zoomed as high as $371 per share before trading was halted at $367 per share just after 2 pm EDT.

Depending on the follow-through, or lack thereof, Musk's statements could cause problems with the Securities and Exchange Commission.

If Musk decides against going private, Gordon said his credibility could take another hit, though one he could weather.

At $420 per share, a deal would represent a 23 percent premium to Tesla's closing price on Monday.

Tesla shareholder Quint Tatro, managing director of Joule Financial, praised the idea as "brilliant", adding that "Musk is exhausted of dealing with all the challenges of being 'public'".

On Aug. 7, 2018, Tesla co-founder and CEO Elon Musk tweeted gnomically: "Am considering taking Tesla private at $420". Musk explicitly notes that he does not intend to merge Tesla and SpaceX, and that the two companies will remain separate, even though the private-shareholder structure would be similar.

Tesla has burned through cash while struggling to produce the Model 3, its lowest-priced electric auto.

Often, going private means that a single new shareholder-or a small group of them-buys out most of the other shareholders, leading to a company with a small number of owners.

"This proposal to go private would ultimately be finalized through a vote of our shareholders", Musk explained. That baseless tweet was quickly deleted and Musk apologized to the diver.

He has also had a prickly relationship with Wall Street, apologising last week to equity analysts from major banks after cutting them off abruptly during the previous earnings conference call. The Saudi fund approached Musk about buying new shares, was rebuffed, and instead bought the shares in secondary markets.

But asked if he would take legal action against Musk over the allegation, Unsworth said: 'If it's what I think it is yes'.

"Given his historic frustration with short sellers, analysts and certain parts of the press, it is perhaps also not surprising that he has given consideration to taking the company private".

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