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Elon Musk stunned the business world today by proposing that Tesla stock be privatized and set at $420 a share. I'm not a lawyer (or with the SEC) but it sounds like possible stock-price manipulation to me (especially from a company insider)....which is illegal, though those laws may not (?) apply to private ownership.
Tesla suspends shares after Elon Musk tweets he wants to take the carmaker private
Tesla's showroom in Beijing. (Jason Lee/Reuters)
By Drew HarwellAugust 7 at 3:16 PM
BREAKING: Tesla suspends shares after chief Elon Musk’s tweets
Tesla chief Elon Musk stunned investors Tuesday when he tweeted that he was considering taking the company private, sending its stock soaring more than 7 percent before trading was halted.
Musk said he had “funding secured” to take the all-electric automaker private at $420 a share, far above its current $360 stock price. That would value the company — already the United States' most valuable automaker — at more than $70 billion.
Tesla shares were halted around 2 p.m. in advance of pending news.
Musk’s tweet was an exceedingly rare way to break potentially monumental news. Public companies often halt trading in their stock and file official releases before making similar statements so as to minimize market jolts and abide by guidance from the Securities and Exchange Commission.
The sudden announcement gained immediate criticism from former regulators who suggested it may conflict with SEC rules for market-moving statements. Harvey Pitt, a former SEC chairman, told CNBC on Tuesday that Musk’s tweets “might constitute fraud if any of the facts he disclosed are not true” or if there was any indication he had floated the proposal purely to boost the stock price.
The company did not respond to requests for comment.
, “I don’t have a controlling vote now & wouldn’t expect any shareholder to have one if we go private. I won’t be selling in either scenario.” (Musk owns approximately 20 percent of Tesla.)
there would be “no forced sales” of stock and that it “will be way smoother & less disruptive as a private company,” adding that it would end “negative propaganda from shorts.” Musk also
that his “hope is *all* current investors remain with Tesla even if we’re private.” “Shareholders could either to sell at 420 or hold shares & go private,” he
Musk has long voiced annoyance with the public markets, where the company is beholden to investors and must report quarterly on its losses. The automaker is also the most shorted on Wall Street, with many investors betting the company will fail.
Musk’s tweet came shortly after the Financial Times reported the state investment fund of Saudi Arabia had accumulated a stake of up to 5 percent in the company, making it one of Tesla’s biggest shareholders.
Gene Munster, the managing partner of venture-capital firm Loup Ventures, said Tuesday that that he estimated “there is a 1 in 3 chance he can actually pull this off and bring Tesla private” because the higher share price “may not be high enough to incentivize existing shareholders to support the sale.”
Munster also said he did not see legal risk from Musk’s tweets because of the Reed Hastings Rule, an SEC guideline announced in 2013 that said it was okay for companies to reveal key information on social media as long as investors have been alerted.
The company said last week that it had burned more than $700 million in cash during the second quarter but made roughly $4 billion in revenue amid increased production of its new Model 3 sedan. Musk said the automaker, which has never made an annual profit, would be profitable by the second half of the year.
Tesla has about $10 billion in outstanding debts and about $2 billion in cash reserves, but Musk has asserted in recent months that the company would have no need to raise new funds. “Are we running low on money? The answer is no,” Musk told investment analysts last week.
It is far from the first time Musk has dropped a financial bomb to his 22 million Twitter followers. On April Fools' Day, amid growing concerns about the company’s cash stockpile, Musk joked via tweets that Tesla had gone “so bankrupt you can’t believe it.”
Musk has long waged war against the short sellers betting the company’s value will plummet. Over the weekend, he tweeted a video parody that cast Adolf Hitler as a short seller flying into a rage at Tesla’s recent financial reports. “Dang, turns out even Hitler was shorting Tesla stock …” Musk tweeted.
Musk originally brought Tesla public in 2010 to help raise funds for the company’s growth. It remained unclear where Musk would get the tens of billions of dollars needed to buy out company shareholders.
Going private would ease the pressure on the embattled company as it works toward what Musk has promised would be sustainable profits. It would also remove key disclosure and reporting requirements that have forced Musk to regularly explain and defend the company to analysts, investors and journalists.
Musk’s other companies specializing in private spaceflight and underground supertrains — SpaceX and The Boring Company — remain private, and Musk has shown reluctance about opening them to the public markets. In 2013, he emailed SpaceX employees that he was “hesitant to foist being public” on the company “given the long term nature of our mission.”
The oil-rich kingdom of Saudi Arabia, now led by crown prince Mohammed bin Salman, has shown a key interest in flashy technological investments. The Saudi wealth fund said last year it would invest $1 billion in the private space companies run by Virgin Group founder Richard Branson.
Last edited by mmarshall; Aug 7, 2018 at 12:41 PM.
Honestly, He is running the company, so he can do what he wants with it...to a degree. Obviously within the confines of the law.
I can't say it would be a smart move or not without looking at the companies financials. But I can say most companies that go private end up succeeding because the shareholder base is already out there. The only way it can really fail is if a bunch of people dump stock and investor's freak out.
This is not insider trading. This is strategic financial and fiscal planning. Big difference.
Honestly, He is running the company, so he can do what he wants with it...to a degree. Obviously within the confines of the law.
This is not insider trading. This is strategic financial and fiscal planning. Big difference.
Yes, I fully agree with that part. The only part that looked iffy to me was the attempt to price the stock at $420 a share....but that law may not apply to private ownership.
elon claimed he secured the money for going private but who is financing the $420 buy out?
i am guessing china is about to own the worlds best ev tech.
but on the bright side if you own tesla shares especially a few month ago at $250 you are about to get $$$.
Apple, Google and Warren Buffet has a big enough bank account. However, with Elon so undisciplined, Warren is out. Elon will overpower Timmy so Apple is out. Google or China is my guess.
All I can say is that it appears Musk's tweets are even weirder than Trump's.
There is a GREAT but lengthy article over at Bloomberg today that goes into detail about Musk, his current situation, and what he probably is hinting at. The article also says that Musk could easily be indicted for fraud:
"So if he doesn’t go through with it, after pretty explicitly promising that he would, then that is … embarrassing. More than embarrassing? The stock closed up 11 percent yesterday due to his tweets. If those tweets turn out to be misleading—if it turns out, in particular, that Musk has not “secured” funding for his proposal—then a lot of people were misled out of a lot of money. Musk has said things that were not true on Twitter before, including about Tesla's financial condition but those were jokes, or just Elon being Elon. There is something different about pretending to launch a buyout of a public company in order to drive up the price, and then not doing it. That’s a thing that the Securities and Exchange Commission pays attention to! That’s a thing that people go to prison for."
Apple, Google and Warren Buffet has a big enough bank account. However, with Elon so undisciplined, Warren is out. Elon will overpower Timmy so Apple is out. Google or China is my guess.
apple has wanted in the car game and they could make it a condition of purchase that elon is out.
apple has wanted in the car game and they could make it a condition of purchase that elon is out.
Apple just wants software hardware combo brains that drives the car, they don't want the actual car. They did same with actual TV set by leaking rumors left and right about the project being in development (which was true) only for you to end up with redesigned Apple TV
Apple, Google and Warren Buffet has a big enough bank account. However, with Elon so undisciplined, Warren is out. Elon will overpower Timmy so Apple is out. Google or China is my guess.
Just because these successful people and companies have a lot of cash on hand does not mean they will -- or want -- to buy Tesla. These people and companies are financially successful because they don't go throwing money around, and buying Tesla at $420 a share is just throwing money around with much less in return.
What would be the return on investment? It would buy a company that has never turned a profit, a company that has a lot of debt, a company with bonds rated as junk. Why would anyone want to spend $7-billion to buy the company only to see $billions of that gone instantly to pay off debts?
That would be a charity case, not an investment. Smart, financially successful companies invest, they don't throw money at charity cases.
Much better to be private that way Musk can hide the fact three years from now they are still losing billions a year. It bonds are now graded junk. In the last 3 1/2 years it has lost over 5 billion. In fifteen years they have never come close to making a profit. Their 15th year was their worst year with a loss of 1.96 billion. They lost 777 million in the first quarter of 2018 and 717 million in the second quarter. Consumer Reports ranks them 25th out of 29 in reliability. Hilarious that unreliable and they do not even have an engine and a single speed transmission. Consumer Reports gave the Model X, their over $100,000 SUV, the lowest score in reliability. They listed their ten dogs to avoid based on reliability and the Model X is #1. Tesla's time is borrowed as the federal tax credits will soon be disappearing and actual profitable car manufacturers increase production of cheaper, better looking and more reliable EV.
Was not aware of the degradation of bond ratings - thanks for the heads-up. I have no stakes in this game, so I'm merely spectating, although I am more than happy to say "I told you so" to them Tesla fanboys.
Tesla shareholders who sell if Musk takes electric-car maker private will be big losers for one reason: A.I.
Tesla shares have been volatile since Elon Musk said Tuesday that he wants to take the electric-car maker private at $420 per share, a $71 billion deal.
The stock rose after its most recent earnings, on improving Model 3 production numbers and its roadmap to profits in the second half of 2018, and again after Musk tweeted plans to take the company private. But on Thursday Tesla gave back those gains.
TSLA shareholders who decide to sell in a private deal may be overlooking a driver of future value: Tesla's early investment in artificial intelligence places it well ahead of the competition in AI.
Keith Wright, Villanova University accounting professor
Published 2 Hours Ago Updated 2 Hours AgoCNBC.comTesla stock has been on the move this week and is hovering around $352 per share. Elon Musk wants to take the electric-car maker private in a $71 billion deal valuing shares at $420 each. One thing was clear even before the surprise Musk tweet: Tesla is significantly undervalued. But one of the reasons for the valuation gap is often overlooked as investors have been hyperfocused on Model 3 production.
Mack Hogan | CNBC
Tesla's leap in AI has left competitors like Alphabet's Waymo, Uber, BMW and GM scrambling in vein to keep pace, and there is a long lineup of companies wanting to partner, including Toyota and Mercedes-Benz.Tesla is the only company truly advancing AI in its vehicles. Musk made the decision to invest in real-world data analytics early. This leap in technological advancement has left competitors like Alphabet's Waymo, Uber, BMW and GM scrambling in vein to keep pace, and there is a long lineup of companies wanting to partner, including Toyota and Mercedes-Benz.
Tesla's early investment and resulting tech have put the company firmly ahead of the pack. To understand how Tesla is unique with AI, you need to understand that Tesla has been collecting billions of miles worth of real-world driving data since 2012, through Model S, X and 3 drivers. Both Tesla and Waymo have been attempting to collect and process enough data to create a car that can drive itself. Waymo and Uber by comparison use inferior simulations, not real-world driving data.
"Musk believes it will take about 6 billion real-world miles to gain 'worldwide regulatory approval' of true self-driving technology. Tesla is the only company to have already surpassed that mark."
Nidhi Kalra, senior information scientist for the nonprofit research organization RAND Corporation, has said that any simulation used by Waymo or another Tesla competitor is a simplification of the real world: "Real-world miles still really, really matter. That's where, literally, the rubber meets the road, and there's no substitute for it."
Billions of new sensors translate into yottabytes of real-world road data, all of which is sent directly to the cloud. Crowdsourcing, or "the wisdom of the crowd," provides Tesla with minute details ranging from their driver's hand placement to how instruments are operated.
Musk believes it will take about 6 billion real-world miles to gain "worldwide regulatory approval" of true self-driving technology. Tesla is the only company to already have surpassed that mark. Tesla also has greater ability to detect useful trends from the massive quantities of real-world data it has already collected.
Tesla uses radar (not lidar), which hits a commercial price point that is more practical. Radar can see farther, the sensors are less expensive, the cameras are solid-state and reliable to a million miles. These are not the bulky, expensive and unreliable roof-spinning lidar systems like Waymo and other Tesla competitors use.
Musk knows his cars will be fully autonomous, fully thinking by 2019, while his competitors are still struggling with low-competency software and expensive, unreliable lidar systems. All Tesla vehicles since 2012 (S, X, 3) were built with the potential to one day become self-driving. The brand-new Tesla-designed and -built AI chips are simple drop-in upgrades. According to ARK Invest analyst Tasha Keeney, "If Tesla solves self-driving cars without lidar, everyone else is going to be kicking themselves."Tesla's A.I. chip is far ahead of competitors
Tesla also diagnoses vehicle components that could require remote repair through a software patch. All of this big data is currently available to help Tesla refine its systems, and nearly all of this data-reliant tech is still far out of reach of its competitors. Tesla is the only autonomous vehicle company to have designed its own proprietary AI chip, bottoms-up, designed from scratch and custom-built for autonomous driving. Musk said on the recent Tesla earnings conference call that the chip is almost ready.
Musk brought director Pete Bannon onto the call. He came to Tesla in 2016 to lead the development of the Autopilot hardware after nearly eight years at Apple. "The chips are up and working, and we have drop-in replacements for S, X and 3; all have been driven in the field," Bannon said.
Cloud-based genetic algorithms can educate the entire Tesla fleet and determine optimal solutions so that individual cars can take immediate action. An even higher level of execution exists when all 700,000 Tesla cars, a fleet size it is expected to reach by the end of this year, are able to form networks to share local information and evaluate millions of options and insights.
Ron Baron to CNBC: Tesla going private is good 9:54 AM ET Wed, 8 Aug 2018 | 01:33Near-term headwinds are just uninformed analyst noise. While Model 3 production was low, Tesla acted quickly to add a third production line this summer. Many industry analysts point to increasing gross margin as the best indicator of financial health, and Tesla has consistently produced gross margins above 20 percent. The company and some analysts project that Tesla will be profitable by the end of 2018, with gross margins of at least 20 percent on the Model 3.
Musk recently confirmed that Tesla will produce 50,000 Model 3's in the third quarter, an increase of 75 percent over Q1, and reach 10,000 per week in 2019. The dramatically increasing Model 3 production rate will take Tesla vehicles on the road to 700,000 by late 2018. In 2016, Tesla sold $1 billion worth of cars in China and reached agreement with the Chinese government to build a factory in Shanghai. Musk said Tesla will use sales income to fund its upcoming $2 billion investment in new factories in China and Europe.
This is not a cult stock. Tesla stock is dramatically undervalued based on its leadership role in self-driving cars, including a superior amount of real-world driving data, the only proprietary AI autonomous driving chip and the fact that it is now self-funding on a go-forward basis.
— By Keith Wright, Villanova University instructor of accounting and information systems
Yeah, because Google hasn't been collecting real-time data for years since the launch of Google Maps, right? Also, nobody goes to privatize a corp unless they're looking to shield the company from something - whether transparency or market risk.
Also, nobody goes to privatize a corp unless they're looking to shield the company from something - whether transparency or market risk.
dell went private to eliminate the 'distraction' of quarterly pressures, allow for making longer term investments without getting reamed by wall st., etc. it's worked out well.
Elon Musk Proposes Private Tesla Ownership.
