Tesla shares halted after Musk tweet
Tesla chief Elon Musk stunned investors Tuesday when he tweeted that he was considering taking the company private, sending its stock soaring more than 6 percent.
Musk said he had “funding secured” to take the allelectric automaker private at $420 a share, far above its current $360 stock price. That would value the company — already the United States’ most valuable automaker — at more than $70 billion.
Tesla shares were halted around 2 p.m. in advance of pending news.
Musk’s tweet was an exceedingly rare way to break potentially monumental news. Public companies often halt trading in their stock and file official releases before making similar statements so as to minimize market jolts and abide by guidance from the Securities and Exchange Commission. The sudden announcement gained immediate criticism from former regulators who suggested it may conflict with SEC rules for potentially market-moving statements.
Harvey Pitt, a former SEC chairman, told CNBC on Tuesday that Musk’s tweets “might constitute fraud if any of the facts he disclosed are not true” or if there was any indication that he had floated the proposal purely to boost the stock price.
The company did not immediately respond to requests for comment.
But Musk continued to tweet, adding, “I don’t have
a controlling vote now & wouldn’t expect any shareholder to have one if we go private. I won’t be selling in either scenario.” Musk also responded “yes” when a Twitter user suggested taking the company private would save “a lot of headaches.”
He also tweeted that his “hope is all current investors remain with Tesla even if we’re private.” “Shareholders could either sell at 420 or hold shares & go private,” he added.
Musk has long voiced annoyance with the public markets, where the company is beholden to investors and must report quarterly on its losses.
Musk’s tweet came shortly after the Financial Times reported the state investment fund of Saudi Arabia had accumulated a stake of up to 5 percent in the company, making it one of Tesla’s biggest shareholders.
The sudden announcement gained immediate criticism from former regulators who suggested it may conflict with Securities and Exchange Commission rules for potentially marketmoving statements.
Harvey Pitt, a former SEC chairman, told CNBC on Tuesday that Musk’s tweets “might constitute fraud if any of the facts he disclosed are not true” or if there was any indication that he had floated the proposal purely to boost the stock price.
Gene Munster, the managing partner of Loup Ventures, said Tuesday that that he estimated “there is a 1 in 3 chance he can actually pull this off and bring Tesla private” because the higher share price “may not be high enough to incentivize existing shareholders to support the sale.”
Munster also said he did not see legal risk from Musk’s tweets due to the Reed Hastings Rule, an SEC guideline announced in 2013 that said it was OK for companies to reveal key information on social media as long as investors have been alerted.
The company said last week that it had burned more than $700 million in cash during the second quarter but made roughly $4 billion in revenue amid increased production of its new Model 3 sedan. Musk said the automaker, which has never made an annual profit, would be profitable by the second half of the year.