Published: Wed, August 08, 2018
Finance | By Cynthia Curry

Tesla Gains Nearly $4 Billion After Single Questionable Elon Musk Tweet

Tesla Gains Nearly $4 Billion After Single Questionable Elon Musk Tweet

Elon Musk's suggestion on Tuesday that he would like to take Tesla Inc private may provide something the electric vehicle maker needs: a little debt relief.

Tesla has been the subject of a number of short sales by investors - who feel the money-losing company doesn't have a path to profitability and that its shares will tumble. At $420 per share, a deal would be worth $72 billion overall.

Mr Musk got the ball rolling Tuesday after the stock market had already been open more than three hours with a tweet announcing he had secured funding to buy all of Tesla's stock at $US420 ($566) per share with no further details.

Shares finished up 11 per cent at US$379.57 after being suspended for about 90 minutes following a series of Musk statements on Twitter in which he initially floated the idea of going private.

Asked on Twitter whether Musk would continue to be CEO under such a scenario, he replied there would be "no change". The email was published on Tesla's corporate blog.

Tesla has been burning through cash as manufacturing problems have thwarted its ability to meet production targets for its Model 3 sedan.

"Being forced to sell at $420 in a go-private deal would be a little bit of a bummer because, although myself and all the other Tesla investors would make money at an all-time high, we'd be missing out on a long-term ride", Russell said.

The broader timing of the tweet is also suspect, given Musk's recent public denunciations of Tesla's (equally vocal) critics.

First, a final decision has not yet been made, but the reason for doing this is all about creating the environment for Tesla to operate best.

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And yet it also left many questions unanswered, namely how Musk - who owns nearly 20 percent of the company - would be able to come up with the $66 billion necessary to complete the transaction. He said in his letter to employees he did not seek to expand his ownership. The buyout is good for a 20 percent premium over the current market price of the stock and would value the company at over $70 billion dollars at current numbers of outstanding shares.

He said funding had been secured and that he would stay on as chief executive if the company went private. Netflix stock moved higher as a result. It drove $2.3 billion of convertible debt past the level at which investors can swap it for stock at a profit; if that happens Tesla will not have to pay back the debt with cash.

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 complained that Tesla is "the most shorted stock in the history of the stock market" and many people "have the incentive to attack the company". The PIF is at the center of Saudi Arabia's efforts to diversify revenue away from oil under an economic transformation plan known as Vision 2030.

Tesla's shares jumped as high as US$371.15 in afternoon trading before trading was halted.

Earlier on Tuesday, a source familiar with the matter said Saudi Arabia's PIF had bought a minority stake of just below 5 percent in Tesla. Musk owns almost 20 per cent of the company.

The SEC declined comment on Musk's tweet. The company said it expects to be profitable during the second half of 2018.

"As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla", Musk wrote.

Disclosure securities experts tell FOX Business that Musk and Tesla complied with the SEC's position on social media released in April 2013 stating: "The Securities and Exchange Commission today issued a report that makes clear that companies can use social media outlets like Facebook and Twitter to announce key information in compliance with Regulation Fair Disclosure (Regulation FD) so long as investors have been alerted about which social media will be used to disseminate such information".

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