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

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

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

He tweeted minutes after it was reported that Saudi Arabia's sovereign wealth fund had taken a stake of up to 5pc in Tesla, a holding worth as much as $2.9bn (£2.2bn).

Tesla and its investors are no stranger to seeing the company's share price follow a rollercoaster trajectory.

Soros Fund Management LLC took a $35 million stake in the 2019 Tesla convertible bonds in May of 2018. He later tweeted that the only uncertainty about completing the deal is whether he can gain shareholder approval. The Times reported the Saudi's Public Investment Fund bought a three per cent to five per cent stake in the electric auto maker.

A buyout at US$420 per share probably won't let Musk reap any benefit from the US$2.6b stock option grant he received this year.

VideoJamie Albertine, Consumer Edge Research senior automotive analyst, discusses Tesla Inc.

Camera IconTesla boss Elon Musk with the new Roadster.

It's unclear if Musk will run into trouble with the Securities and Exchange Commission over how he disclosed the information.

After Musk, the next largest shareholders in Tesla are the mutual fund giants T. Rowe Price and Fidelity, with stakes of more than 9% and 8%, respectively, according to Thomas Reuters Eikon.

A company's CEO announcing a propsed buy-out on Twitter before notifying shareholders would be unusual in the extreme, which is driving caution among traders.

"It's very unusual for any CEO other than Elon Mr Musk". But he said the idea made a certain amount of sense. News about the idea first surfaced this afternoon on Twitter via Musk, who tweeted, "Am considering taking Tesla private at $420".

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Shares rose 7.4 percent to $367.25 before being suspending shortly after 1800 GMT.

Following the company's surge after last week's earnings, Musk took aim again at a short-seller in a reposted short YouTube video that likened these investors to Hitler's last days.

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.

Musk and his luxury automaker have been under enormous pressure to overcome repeated delays and deliver on promises of producing 5,000 of Tesla's more affordable Model 3 cars per week.

It would be one of the biggest go-private deals on record with a price tag of about US$72 billion, based on US$420 per share. Will be way smoother & less disruptive as a private company.

Musk has occasionally griped about the frustrations of running a public company: past year he called Tesla a "drama magnet" - and he has vowed not to do an initial public offering for his other major venture, SpaceX, until after regular trips to Mars begin, if ever.

In a subsequent blog posted on Tesla's website, Musk said that while no final decision had been made, "the reason for doing this is all about creating the environment for Tesla to operate best". Musk's tweetstorm was over, but Tesla's future was uncertain.

Starting in November, Tesla faces repayment of $1.7 billion in debt over the next 18 months that is tied to the company's stock price. Short sellers are speculators who effectively bet against the price of Tesla's shares, potentially adding to the volatility of Tesla's stock price and giving them a vested interest in seeing Tesla fail. He also stated that this is not an attempt to assume more control over his company - Musk owns approximately 20 percent of Tesla right now, and he doesn't see that changing after the company goes private.

The company had a market value of US$58 billion as of Monday's close.

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