Tesla plunges, wiping out tweet-fueled rally in just two days

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.

Reports that a regulatory probe was wider than previously thought cut almost 5 percent from Tesla's shares on Thursday - hours before the carmaker's board distanced itself from its chairman and chief executive by telling him to get his own advisers for taking the company private.

But Musk probably doesn't need that much financing because he owns a roughly 20 percent stake in the company and he is also creating a special fund that will allow existing shareholders to retain their stakes in Tesla in the private market, if they want.

The SEC on Wednesday asked Tesla whether one of CEOElon Musk's tweets about the possibility of taking the company private was truthful, The Wall Street Journal reported.

The CEO apparently has the preliminary backing of the company's board of directors, six of whom issued a statement yesterday saying that Musk broached the subject recently and they were considering its merits.

Bloomberg on Thursday afternoon confirmed the paper's report and said the federal securities regulator had been looking into Tesla's public statements before the tweet.

It's unclear whether Saudi Arabia's sovereign wealth fund, which is said to have built less than a 5 per cent stake in Tesla, has agreed to commit money to the transaction, CNBC said.

The Tesla CEO said in a Twitter post on Tuesday that his plan for a privatised Tesla has been supported by investors. Putting in place the structure employed by SpaceX would provide investors with an avenue to sell their stock in the future should Tesla go private by removing its shares from trading on the Nasdaq Stock Market, Prasad said.

But "if no firmer details emerge", he wrote in a report to clients, "investors would likely increasingly debate Musk's credibility and seemingly unhealthy focus on the shares' price and volatility".

Some are speculating the recent moves could all be part of a Musk plot to punish the short-sellers.

Is Elon Musk's sensational tweet legal?

The company faces a make-or-break moment in its eight-year history as a public company as competition from European automakers is poised to intensify with new electric vehicles from Audi and Jaguar, with more rivals entering the market next year.

Just last week, he revealed he had been working 110 hours a week to deliver on short-term promises he had made to Wall Street, a load he traced to his boorish behavior toward two analysts earlier this year. "So it'd have to be equity, and there's not enough stupid money to buy this company at an $80 billion valuation". That will make it more hard for companies to carry heavy debt loads - and taking Tesla private would means taking on a great deal of debt.

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