Regulator examines Musk's tweets on taking Tesla private

Marcus Newton
August 9, 2018

Columbia Law School professor John Coffee discusses the legal concerns over Tesla CEO Elon Musk's tweet that he may take the company private. Funding secured." But later the same day, he said "a final decision has not yet been made, "in an e-mail to the company's employees". Short sellers borrow company stock and then resell the shares in the open market in a bet that they will be able to replace them at a much lower price in the near future to repay their debt.

The report came the day after Musk said he was considering taking Tesla private and that funding had been secured, but did not offer any specifics about the unprecedented move.

The Tesla CEO is the company's largest shareholder, owning almost 20 percent. The move would also have little effect on Musk's current stake in the company, which rests at about 20 percent in current publicly traded form.

Mr Musk has been under intense pressure this year to turn his money-losing, debt-laden company into a profitable higher-volume manufacturer, a prospect that has sent Tesla's valuation higher than that of GM. Tesla's other board members are Musk, his brother Kimbal Musk and venture capitalist Steve Jurvetson.

The shares were already flying after the Financial Times reported that Saudi Arabia's investment fund had bought a $2 billion stake in the company.

That would mark the biggest such transaction in history, worth more than $70 billion US. But going private could also complicate Tesla's effort to build a mainstream electric auto by removing the easy access to capital the Wall Street darling has enjoyed. The move would also foreclose the option of selling more stock to raise cash every year, a move which Musk has disfavored in recent years.

Taking Tesla private would allow it to focus on revolutionising the automobile industry Musk believes
DAVID ZALUBOWSKI AP Taking Tesla private would allow it to focus on revolutionising the automobile industry Musk believes

As Tesla's board of directors rallied Wednesday behind chief Elon Musk's extraordinary push to take the all-electric automaker private, a growing contingent of investors, analysts and former regulators voiced their doubts that the deal would ever take off.

I drove the regular, 271-hp, rear-wheel-drive Tesla Model 3 a few months ago and liked it.

Ultimately it will be up to the shareholders whether Tesla remains public or goes private, but the SEC is now curious about how Tuesday's events unfolded.

The Tesla board responded to the proposal earlier Wednesday morning, indicating that it is evaluating things. "And if you stay as a shareholder you get less information than before and you depend more and more on Elon Musk". The move is estimated to require north of $50 billion to buy out the public shareholders.

Tesla's shares were down less than one per cent at $376.31 United States in morning trading on Wednesday after closing up 11 per cent at $379.57 USA on Tuesday.

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