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

Alicia Cross
August 8, 2018

Tesla CEO Elon Musk has shocked the financial world with a tweet saying he is considering taking the company private in a move that would pay $420 (£324.58 / €362.11) per share.

Musk's tweet comes as Tesla faces continued pressure to ramp up output of the Model 3 sedan, its first effort at the middle market.

In its August 1 earnings release, Tesla confirmed output was on track after missing earlier benchmarks as it reported a bigger-than-expected loss but said it was on track to become profitable later this year.

The CEO claimed that the funding to take the automaker private at $420 per share was "secured".

Musk's tweet isn't a clear violation of SEC rules, but it could be if it was explicitly meant to boost Tesla's price.

The most obvious equity partners for Musk would be a sovereign wealth fund such as Saudi Arabia's Public Investment Fund (PIF) or major technology investment funds such as SoftBank Group Corp's Vision Fund, bankers said.

Elon now owns about 20 percent of Tesla and so he would need something like $50 billion in additional capital to fully privatize the company, along with a shareholder vote of "yes" to the move.

Musk last month apologized for calling British caver Vernon Unsworth, who helped rescue 12 Thai boys from a cave, a "pedo", short for pedophile, after Unsworth spoke dismissively of the Tesla chief's proposal for bringing the boys to safety. In Musk's case, it's arguable that all investors know to be watching his tweets every second of the day.

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The confusion caused by Musk's Tuesday announcement via Twitter also prompted regulators of the Nasdaq stock market to temporarily suspend trading in Tesla's stock. Musk did not disclose the source of the funding. Although briefly halted, Tesla resumed trading on the Nasdaq exchange after a almost two-hour pause, with shares rising more than 10%. Musk's offer is 9 per cent higher than Tesla's peak closing price of $385 reached almost a year ago.

"Going forward, we believe Tesla can achieve sustained quarterly profits, absent a severe force majeure or economic downturn, while continuing to grow at a rapid pace", the company said in its earnings report.

Making money has proven elusive for Tesla while it has been investing in electric auto technology and ramping up production of its vehicle, including a sedan with a starting price of $35,000 to appeal to a broader audience.

When Elon Musk tweeted he might take Tesla private, investors who were betting on Tesla stock falling lost nearly a billion dollars Wednesday.

The U.S. Securities and Exchange Commission allows companies to use social media outlets like Facebook and Twitter to announce key information in compliance with its fair disclosure rules so long as investors have been alerted about which social media outlets will be used to disseminate such information.

In July, Model 3 - that comes with a base price tag of $35,000 - not only had the top market share position in its segment in the United States, but it also outsold all other mid-sized premium sedans combined - accounting for 52 per cent of the segment overall.

"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.

Alexandra Olson reported from NY.

Other reports by Free-Prsite

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