Tesla tweet 'highly problematic,' says former SEC boss

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Tesla and SpaceX did not respond to a request for comment.

It all began when Musk tweeted about a plan to take electric auto manufacturers Tesla private, signing off his message with the words: "Funding secured".

Exactly 48 hours after Elon Musk triggered a frantic rally with a tweet saying he was considering taking Tesla Inc. private, the stock erased all of those gains.

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 goal vehicle, like the one that exists at his aerospace company SpaceX, would allow Tesla shareholders to remain invested if they so choose.


The entrepreneur owns about 20% of Tesla, meaning there is a potential conflict of interest should he head talks to take the automaker private.

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

The SEC inquiry is preliminary and won't necessarily lead to anything more formal. That has some experts raising an eyebrow.

To take a public traded company the size and net worth of Tesla back to private would usually require a "leveraged buyout" where the company itself or another party takes a large loan to buy out all the shares from the companies shareholders to go private. As far as Musk's stated share price to take the company private, analysts stated that there's upside risk in the near term to around $400 but downside risk to $340, "if no firmer details emerge, as investors would likely increasingly debate Musk's credibility and over-focus on the shares' price and volatility". "Otherwise, why wouldn't you just wait until you're definitely doing a deal to say something?"


The chief executive officer raised the go-private possibility with the board last week, according to a statement from six of Tesla's nine directors.

The tweets intensified the SEC's probe, since it was already investigating his public statements about order volume and revenue, according to reports. Tesla did not disclose the investigation, which did not result in an enforcement action, the firm said. Musk has feuded publicly with regulators, critics, short sellers and reporters, and some analysts suggested that less transparency would be welcomed by Musk. Musk could be asked to recuse himself from the diligence process. "It actually makes us less efficient to be a public company".

The Palo Alto, California, company has only posted a quarterly profit twice in its history and has never made money during an entire calendar year, something that Musk has been trying to change by cutting costs, including recent mass layoffs that trimmed Tesla's workforce by 9 percent.

"They're being bombarded with questions that we don't think are as relevant to the long-term value of the company", said Sam Korus, an analyst for ARK Investment Management, which had 443,874 Tesla shares as of June 30. One of those that could be involved is Saudi Arabia's sovereign-wealth fund which allegedly took a stake in Tesla last but has no plans to expand it according to the Wall Street Journal. He thinks the stock could rally sharply above $420 and has a price target on the stock of $571. Check back for updates.


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