Tesla shares fall 5% on Wall St. skepticism, SEC probe reports


Enlarge Image Elon Musk tweets about taking Tesla private and the world goes crazy. Robyn Beck AFP Getty Images

If you compare Tesla's stock price movement in the past 48 hours with its latest quarterly earnings, it's unbelievable that Tesla's total loss accumulated over the past three months ($717 million) was offset in one afternoon by a short tweet from CEO Elon Musk-at least on paper it was.

Shares had closed at $341.99 on Monday.

He said taking Tesla private would help the company operate better, "free from as much distraction and short-term thinking as possible". Further skepticism came on Thursday following a report from the Wall Street Journal that the US Securities and Exchange Commission (SEC) had "made inquiries" into whether Musk's tweeted claim that funding was secured was in fact truthful, prompting speculation about a potential SEC investigation.

The board has also asked Musk to brief them on any funding plans that would allow him to take Tesla private, something that may or may not exist, according to a report by Thomson Reuters. At the same time, Musk's behavior could easily be framed as illicit stock market manipulation.

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Mr Musk has said he would be looking to keep his ownership of Tesla at around 20 per cent in a buyout deal, and that a special objective vehicle, like the one that exists at his aerospace company SpaceX, would allow Tesla shareholders to remain invested if they so choose.

Tesla's board is forging ahead with its review of Elon Musk's bold and ambiguous gambit to take the electric-vehicle maker private.

In a statement on Wednesday, Tesla's board said its discussion with Musk "addressed the funding" for the deal, without offering more details.

In a follow-up tweet, Musk wrote: "I don't have a controlling vote now and wouldn't expect any shareholder to have one if we go private". The agency had been looking into Tesla's public statements on production numbers and sales targets, the news site reported, and intensified its scrutiny after Tuesday's tweet. Tesla is and probably always will be a company that will remain underneath the spotlight, so nearly any actions taken by the company itself or Elon Musk as an individual or CEO will have adverse effects on its stock price.

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Musk's tweets about how Tesla could structure the deal has left $370 billion asset manager Janus Henderson Group Plc perplexed. Musk has feuded publicly with regulators, critics, short sellers and reporters, and some analysts suggested that less transparency would be welcomed by Musk. He said that Tesla had not received such a notice, and that he had no expectation of raising new equity.

"What investors are waiting for is more details around what is meant when Elon Musk says funding is secured", George Galliers, an analyst at Evercore ISI who rates Tesla the equivalent of a hold, said on Bloomberg Television. At USD 420 a share, Tesla would be valued at just over USD70 billion, well above its stock market value, which reached USD 63.8 billion on Tuesday.

Buying Tesla in its entirety would cost $72 billion, based on the company's outstanding stock as of July 27.

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