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Published: Thu, August 09, 2018
Economy | By Melissa Porter

SEC Launches Inquiry After Elon Musk Tweets About Taking Tesla Private

SEC Launches Inquiry After Elon Musk Tweets About Taking Tesla Private

In a short statement, several Tesla board of members said Musk talked about taking the company private last week and "addressed the funding for this to occur".

A lot of questions remain unanswered but, if Tesla goes through with the plan, it would reportedly be the largest leveraged buyout in history.

Tesla directors have said they knew about Elon Musk's surprise proposal to privatise the money-losing vehicle maker before he tweeted about it and have met several times in the past week to discuss the proposal. In short, Musk believes going private can place the focus back on long-term planning, which is now viewed through the lens of how it will affect short-term quarterly finances. Some might argue that it was improper, and perhaps even illegal, for Musk to make such an announcement on social media because people who follow Elon Musk on Twitter had an unfair advantage over investors who don't.

Tesla's closing price of $379.57 a share on Tuesday is 5.5 percent above the $359.87 conversion price for the company's $920 million convertible debt due in March, according to a securities filing. Musk has fought running battles with speculators who have made Tesla America's most shorted company.

Musk tweeted he wanted to take Tesla private by buying back stock at $420 per share, and that current shareholders would be able to keep their stake in the automaker. Musk owns about 20 percent of the Palo Alto, California, company's stock, so that likely would reduce the cost of the buyout.

Scepticism about the legitimacy of Musk's proposed deal surfaced nearly immediately after Musk dropped the bombshell on his Twitter account a few hours after the stock market opened on Tuesday.

'Basically, I'm trying to accomplish an outcome where Tesla can operate at its best, free from as much distraction and short-term thinking as possible, ' Musk wrote.

Musk's proposed move is seen as a strategy to avoid several issues: Wild stock swings, short-sellers who profit on stock value drops and shareholder pressure on quarterly performance, according to the Financial Times.

Musk is CEO and chairman of Tesla. 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 stock fell more than 2% and closed at $370.34.

Tesla shares sank slightly in trading Wednesday as some Wall Street firms expressed skepticism about CEO Elon Musk's push to take the electric auto maker private.

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

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