Investors may be wondering what Elon is smoking this morning following a tweet in which he claimed he’s considering taking Tesla private at $US420 ($566) per share.
What seemed like a joke at first may be serious and as the company’s stock price went crazy, trading had been halted.
Musk’s tweet came almost simultaneously with a new report from the Financial Times that revealed for the first time that Saudi Arabia’s Public Investment Fund has been quietly buying up about five per cent of the electric car company over the last few months to the tune of $US2 billion ($2.7 billion).
It’s unclear if Musk’s tweet, the new report, or the two items’ powers combined were responsible for the Tesla stock pop, but shares in the company shot up as much as 7.3 per cent.
Am considering taking Tesla private at $420. Funding secured.
— Elon Musk (@elonmusk) August 7, 2018
Because 420 is the universal number indicating it’s time to smoke some weed, it was easy to laugh off Musk’s tweet as just one of his weird jokes. But after he called a hero diver who rescued children from a cave in Thailand a paedophile and seemingly meant it, it’s best not to assume the CEO is joking.
And since his tweet, he’s elaborated on the idea and shared a blog post explaining that he’s quite serious.
My hope is *all* current investors remain with Tesla even if we’re private. Would create special purpose fund enabling anyone to stay with Tesla. Already do this with Fidelity’s SpaceX investment.
— Elon Musk (@elonmusk) August 7, 2018
In the post, Musk said that he feels a forward-looking company such as Tesla is better off being private and avoiding the short-term thinking involved with public markets.
“I fundamentally believe that we are at our best when everyone is focused on executing, when we can remain focused on our long-term mission, and when there are not perverse incentives for people to try to harm what we’re all trying to achieve,” he wrote.
He also emphasised that he hopes all shareholders decide to stay in for the ride and the proposal will ultimately be put to a vote.
Around 4AM AEST on Wednesday, trading of Tesla shares was halted for “pending news”. About an hour and a half later trading resumed and rose by more than 11 per cent.
Some people on Twitter immediately began speculating that Musk may have wandered into a potential regulatory violation with his tweet. A spokesperson for the SEC declined to comment when reached by Gizmodo. But former SEC chair Harvey Pitt told CNBC that Musk’s out-of-the-blue tweet is “highly unprecedented… and raises significant questions about what his intent was”.
The SEC has brought charges in the past in at least one case in which a man was accused of manipulating stock prices with false tweets and taking advantage of the reduced prices.
Officially, the SEC is fine with financial announcements on social media as long as investors are alerted to which platform they should be keeping an eye on and that no investors are given an advantage to receive the information first. In Musk’s case, it’s arguable that all investors know to be watching his tweets every second of the day.
420
— Elon Musk (@elonmusk) August 7, 2018
Marketwatch currently lists Telsa’s market cap at a little over $US58 billion ($78 billion). Factoring in $US8.8 billion ($11.9 billion) in debt, Musk’s ganja-friendly target price to go private would value the company at around $US80 billion ($107.8 billion). Bloomberg reports that if Musk managed to scrape together the cash to go private, it would be the largest leveraged buyout in history.
It appears that Musk is hopeful that shareholders will simply hang in for the ride and willingly go private.
Blaze it.