Elon Musk Thinking About Taking Tesla Private at $420 a Share

Elon Musk Thinking About Taking Tesla Private at $420 a Share

Elon Musk Thinking About Taking Tesla Private at $420 a Share

Mr Musk probably wasn't violating any regulations by simply announcing that he was considering taking the company private, Mr Gordon said, but his assertion that the funding already has been locked up could "expose him to at least potential legal risk" if it turns out that the financing is on shaky footing. But later in the afternoon, trading in the stock was halted pending an official company announcement.

Part of the reason Musk believes this is the right thing to do is because Tesla faces increased scrutiny as a public company.

Tesla shares have been on the upswing since it reported on August 1 a bigger-than-expected second-quarter but signaled that it expects to reach profitability in the third quarter and remain in the black for the foreseeable future.

He shared more details in a series of Twitter replies, noting that should Tesla go private, he'd remain in his role as founder and CEO of Tesla.

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During a conference call in May, Mr. Musk shut down questions from analysts, calling them "boring" and spent much of the time talking to an investor who runs a YouTube channel, prompting an after-market sell-off of Tesla's shares.

The SEC declined comment on Musk's tweet.

A short squeeze is a trading scenario that occurs from time to time in heavily shorted stocks, when bearish traders are forced to buy shares to avoid big losses - something that ends up pushing the stock higher. Funding secured."Musk's tweet followed a report from the Financial Times that the Public Investment Fund of Saudi Arabia had acquired a $2 billion stake in the company". His asking price of $420 would be 22 percent of Monday's closing share price, and almost 9 percent above the stock's all-time closing high of $385.

The only problem? Those rumors were seeded, very publicly, by Musk himself, who announced his thoughts on Twitter ― and went so far as to set a prospective buyback price of $420 and promise he had the funding "secured".

Palo Alto-based Tesla, named after the physicist Nikola Tesla, went public in 2010.

While it is unlikely the SEC will take action on Tuesday's tweet, there are a group of investors who are likely to sue. The switch would mean that shareholders could no longer freely sell their shares on the open market, but Musk said that employees-and potentially other shareholders-would still receive periodic opportunities to cash out.

And Tesla also released an email to its employees in which Musk argued going private would release the company from "wild swings in our stock price that can be a major distraction for everyone working at Tesla".

His US$12b Tesla stake would presumably be rolled into the private enterprise. He added: "The 16 percent premium to current share price may not be high enough to incentivize existing shareholders to support the sale". He also suggested the move could only be temporary as he stated "once Tesla enters a phase of slower, more predictable growth, it will likely make sense to return to the public markets".

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