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Published: Wed, August 08, 2018
Economy | By Melissa Porter

Elon Musk's tweet about going private costs Tesla short sellers $1.3 billion

Elon Musk's tweet about going private costs Tesla short sellers $1.3 billion

Trading in Tesla shares was halted on Tuesday, after a tweet by chief executive Elon Musk sent shares soaring by more than 7%.

Trading for Tesla stock was re-activated fifteen minutes before the closing bell was rung, and the automaker closed the day up 12 percent, realizing a massive $6 billion+ appreciation in market capitalization.

Musk in a letter to employees August 7th, 2018, "As the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company".

"Gene Munster, a partner at the venture capital firm Loup Ventures, said that taking Tesla private "makes a ton of sense", for the following reason: "[Musk's] missions are big and make it hard to accommodate investors' quarterly expectations".

But earlier in the day, the Financial Times reported that Saudi Arabia's sovereign wealth fund, overseen by Crown Prince Mohammed bin Salman, has built an undisclosed stake of between 3 and 5 percent stake in Tesla.

However, Mr Musk has said he has no plans to do so and promised that the firm will be profitable in the second half of the year, barring any unforeseen events. It zoomed as high as $371 per share before trading was halted at $367 per share just after 2 pm EDT.

If Musk decides against going private, Gordon said his credibility could take another hit, though one he could weather.

Tesla completed an initial public offering of stock in 2010, largely because Wall Street provided a convenient vehicle to raise billions of dollars to finance its expansion.

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As for using Twitter as an "established channel of communication", Tesla pointed FOX Business to an SEC filing in 2013 in which the company clearly outlines how investors can monitor company developments, including following Musk on Twitter, among the other traditional sources such as signing up for company press releases and visiting the investor relations website.

The immediate question was whether Musk was joking.

Going private is one way to avoid the intense scrutiny of public markets. It burned through less cash ー $739.5 million in Q2 compared to $1 billion the quarter before ー and managed to increase production significantly of the mid-range Model 3 sedan. He also said he does not now have a controlling vote in the company and wouldn't expect a single shareholder to have one if the company were private.

But asked if he would take legal action against Musk over the allegation, Unsworth said: 'If it's what I think it is yes'.

Tesla shares, which were already rising on news of the Gulf investor, spiked in response.

Now the question is, is this a similar move, taking the pressure off the public performance that Musk disdains each quarter, combined with some hubris over decimating the multitude of short positions.

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