Tesla board weighs CEO's buyout bid as questions swirl

Reuters  Rebecca Cook

Reuters Rebecca Cook

The board members said they were "taking the appropriate next steps" to evaluate the proposal.

The Wall Street Journal reported Wednesday that SEC investigators could be looking into a variety of violations such as artificially raising the automaker's value via the Tweet and failure to disclose the source of funding to shareholders. "This is out there, even for Tesla", analysts with Barclays wrote Wednesday. "Why announce it to the world in this way. which could significantly contribute to the required premium and leverage?". A day earlier, shares rose more than 11% after Musk unexpectedly tweeted that he was exploring a move to take Tesla private at $420 per share. These analysts have an average price target on the stock of $321.89, which implies almost 14% downside from current levels.

Shares rose 11 percent Tuesday but fell almost 2 percent at midday Wednesday to $372.38.

Musk has downplayed the power of the tweets he launches at all hours to his 22 milion Twitter followers: "My tweets are literally what I'm thinking at the moment, not carefully crafted corporate bs, which is really just banal propaganda", he said in June. However, Musk expects the shareholders to agree with him and allow him to take the company private again. The board said only that Musk had "addressed the funding for this to occur". "He has done enough things that might warrant somebody taking a close look", Pitt said.

"First, a final decision has not yet been made, but the reason for doing this is all about creating the environment for Tesla to operate best".

Nonetheless, $1.4 billion to Elon Musk - all in a day's work, right?

"What does Musk mean by 'funding secured?"' asked Toni Sacconaghi, an analyst at Bernstein who has always been bearish on Tesla shares.

There is no evidence this was Musk's intention with his remarks on Tuesday.

It's unclear if Musk has misled investors, let alone whether he has done so intentionally. About a quarter of Tesla shares are on loan to traders who will profit if the share price falls. Many initially thought it was Elon Musk's attempt at a bad joke about marijuana, because "420" has always been associated with pot. "This is very haphazard and raises, in my view, serious questions about why he would choose to do things in exactly this way".

If Musk's tweet was indeed not a joke, another problem is that it could have been illegal. The SEC declined to comment.

China's Tencent Holdings Ltd, which took a 5 percent stake in Tesla previous year, could also be a possible partner.

If Musk didn't actually have financing secured when he said he did. oh boy.

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