Musk’s Itchy Twitter Finger Appears Like Larger Downside For Tesla Stocks Than Shorts

Elon Musk at the 2018 SXSW Conference and Festivals in Austin, Texas.

<figcaption><fbs-accordion><p class="color-body light-text">Elon Musk at the 2018 SXSW Conference and Festivals in Austin, Texas.<small>2018 Amy E. Price</small></p></fbs-accordion></figcaption></figure><p><a href="https://www.forbes.com/profile/elon-musk/#274236d7999b" target="_blank" class="color-accent">Elon Musk</a> suggested this week on Twitter that a key reason he’d like to take the publicly traded company private is to minimize share price volatility, a move that could cost <a href="https://www.forbes.com/sites/chuckjones/2018/08/09/elon-musks-82-billion-tesla-buyout-folly/#6b471c17595c" target="_blank" class="color-accent">more than $80 billion</a>. Here’s a cheaper and easier option: Stop tweeting or at a minimum do it more judiciously. </p><p>The tech billionaire who leads the electric car and solar power company is now <a href="https://www.forbes.com/sites/alanohnsman/2018/08/08/elon-musks-bombshell-tweets-about-taking-tesla-private-said-to-trigger-sec-review/#12a69bec37b0" target="_blank" class="color-accent">contending with a U.S. Securities and Exchange Commission review</a> sparked by his bombshell announcement that he’s “considering taking Tesla private at $420. Funding secured.” That he made such a material announcement while the stock was trading on Nasdaq, and provided no supporting evidence of who might fund the leveraged buyout, didn’t go unnoticed. </p><p>Tesla shares jumped 10% on Aug. 7 to $379.57 following his tweets before trading in it was halted. The stock shed $9 of that gain on Aug. 8 and fell about 5% on Thursday to close at $352.45, giving back nearly all of the tweet-driven increase. </p><figure class="image-embed embed-1">

Tesla's share price performance from July 31 through Aug. 9.

<figcaption><fbs-accordion><p class="color-body light-text">Tesla’s share price performance from July 31 through Aug. 9.<small>Yahoo Finance</small></p></fbs-accordion></figcaption></figure><p>SEC investigators have reached out to Musk to verify that he indeed has secured backers to fund his plan and also to understand why he chose to announce the possibility in the way he did, according to <a href="about:blank" target="_blank" class="color-accent">Bloomberg</a> and <a href="https://www.wsj.com/articles/sec-has-made-inquiries-to-tesla-over-elon-musks-taking-private-tweet-1533757570" target="_blank" class="color-accent">The Wall Street Journal</a>.&nbsp;An SEC spokesman reached by&nbsp;<em>Forbes</em>&nbsp;declined to comment on the matter, and Tesla hasn’t responded to a request for information.</p><p>If it turns out that he doesn’t have the funding secured, Musk could face civil and criminal penalties, former SEC Chairman <a href="https://www.cnbc.com/2018/08/08/ex-sec-chair-musk-tweet-puts-him-at-risk-of-civil-criminal-penalties.html" target="_blank" class="color-accent">Harvey Pitt told CNBC</a>. </p><p>"If you make a false statement in connection with the trading of securities, you run the risk of both having to pay for the damages you caused and also you run the risk of a criminal prosecution," he told the financial news channel. </p><p>Given the vast amount of funding required to buy Tesla, many analysts and market watchers, including <em>Forbes</em> contributor <a href="https://www.forbes.com/sites/jimcollins/#5d9404225157" target="_blank" class="color-accent">Jim Collins</a>, find it odd that the identity of Musk’s backers hasn’t been revealed. </p><p>“We live in a world of leaks and tweets, so why haven’t any hit the tape?” Collins, a long-time auto analyst and fund manager, <a href="https://www.forbes.com/sites/jimcollins/2018/08/08/elon-musk-tweeted-funding-secured-for-a-tesla-takeover-ok-where-is-it/#283ccc707dd0" target="_blank" class="color-accent">said in an Aug. 8 article</a>. “There is no way any person, even with the force of will of Musk, could raise $66 billion (the total enterprise value minus the value of his stake) in secret. It just does not happen that way in 2018.”</p><p>Last week Musk excited investors with an upbeat message about the improving production of Model 3 electric cars and <a href="https://www.forbes.com/sites/alanohnsman/2018/08/01/tesla-vows-sustainable-profitability-as-quarterly-loss-blows-past-expectations/#31955c176c6d" target="_blank" class="color-accent">sustainable profitability ahead</a> for Tesla, which in eight years as a public company has only had two profitable quarters. That sparked a $51.14 gain for the stock from its July 31 close, the day before Tesla reported second-quarter results, to $349.54 on Aug. 2, the day after Musk’s sunny forecast. </p><p>This makes the privatization comments look particularly surprising, UBS equity analyst Colin Langan said in a research note. </p><p>“We find the timing of the tweet (&amp; the method itself) interesting given less than a week ago the company said it would be profitable with positive cash flow in Q3/Q4,” Langan said. “In our view, this may be another way for Musk to change the conversation around the company; however, we note that the fundamentals have in no way changed.”</p><p>Tesla’s board, which confirmed it was <a href="http://ir.tesla.com/news-releases/news-release-details/statement-following-members-teslas-board-directors-brad-buss" target="_blank" class="color-accent">briefed by Musk on his plan last week</a>, may meet next week with financial advisors to begin considering the idea, <a href="https://www.cnbc.com/2018/08/09/tesla-board-tells-elon-musk-to-recuse-himself-prepares-to-review-take.html" target="_blank" class="color-accent">CNBC reported</a>. They may also ask Musk, who is both CEO and chairman, to recuse himself from that process.</p><p>In an Aug. 7 <a href="https://www.tesla.com/blog/taking-tesla-private" target="_blank" class="color-accent">note to Tesla employees</a>, Musk pointed out his frustration with the company’s share price volatility. </p><p>“As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders,” Musk wrote. What’s more, "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.”</p><p>He’s right on both points. But this week, as has been the case before, the primary trigger for Tesla’s fluctuation is Musk himself.&nbsp;</p>”>

Elon Musk on the 2018 SXSW Convention and Gala’s in Austin, Texas.2018 Amy E. Value

Elon Musk prompt this week on Twitter key explanation why he’d love to take the publicly traded corporate personal is to reduce percentage value volatility, a transfer that might price greater than $80 billion. Right here’s a inexpensive and more uncomplicated possibility: Forestall tweeting or at a minimal do it extra judiciously.

The tech billionaire who leads the electrical automotive and solar energy corporate is now contending with a U.S. Securities and Alternate Fee assessment sparked by means of his bombshell announcement that he’s “taking into account taking Tesla personal at $420. Investment secured.” That he made any such subject matter announcement whilst the inventory used to be buying and selling on Nasdaq, and equipped no supporting proof of who would possibly fund the leveraged buyout, didn’t cross disregarded.

Tesla stocks jumped 10% on Aug. 7 to $379.57 following his tweets ahead of buying and selling in it used to be halted. The inventory shed $nine of that achieve on Aug. eight and fell about five% on Thursday to near at $352.45, giving again just about the entire tweet-driven building up.

Tesla's share price performance from July 31 through Aug. 9.

Tesla’s percentage value efficiency from July 31 via Aug. nine.Yahoo Finance

SEC investigators have reached out to Musk to ensure that he certainly has secured backers to fund his plan and in addition to know why he selected to announce the likelihood in the best way he did, in step with Bloomberg and The Wall Side road Magazine. An SEC spokesman reached by means of Forbes declined to remark at the topic, and Tesla hasn’t answered to a request for info.

If it seems that he doesn’t have the investment secured, Musk may face civil and legal consequences, former SEC Chairman Harvey Pitt informed CNBC.

“If you are making a false remark in reference to the buying and selling of securities, you run the chance of each having to pay for the damages you brought about and in addition you run the chance of a legal prosecution,” he informed the monetary information channel.

Given the huge quantity of investment required to shop for Tesla, many analysts and marketplace watchers, together with Forbes contributor Jim Collins, in finding it unusual that the id of Musk’s backers hasn’t been published.

“We are living in a global of leaks and tweets, so why have no hit the tape?” Collins, a long-time auto analyst and fund supervisor, stated in an Aug. eight article. “There’s no method anyone, even with the pressure of will of Musk, may carry $66 billion (the full endeavor worth minus the price of his stake) in secret. It simply does no longer occur that method in 2018.”

Closing week Musk excited traders with an upbeat message in regards to the bettering manufacturing of Type three electrical vehicles and sustainable profitability forward for Tesla, which in 8 years as a public corporate has most effective had two successful quarters. That sparked a $51.14 achieve for the inventory from its July 31 shut, the day ahead of Tesla reported second-quarter effects, to $349.54 on Aug. 2, the day after Musk’s sunny forecast.

This makes the privatization feedback glance specifically sudden, UBS fairness analyst Colin Langan stated in a analysis observe.

“We discover the timing of the tweet (& the process itself) fascinating given lower than per week in the past the corporate stated it will be successful with sure money drift in Q3/This fall,” Langan stated. “In our view, this can be differently for Musk to modify the dialog across the corporate; on the other hand, we observe that the basics have by no means modified.”

Tesla’s board, which showed it used to be briefed by means of Musk on his plan closing week, would possibly meet subsequent week with monetary advisors to start out taking into account the theory, CNBC reported. They might also ask Musk, who’s each CEO and chairman, to recuse himself from that procedure.

In an Aug. 7 observe to Tesla workers, Musk identified his frustration with the corporate’s percentage value volatility.

“As a public corporate, we’re topic to wild swings in our inventory value that may be a big distraction for everybody running at Tesla, all of whom are shareholders,” Musk wrote. What is extra, “as essentially the most shorted inventory within the historical past of the inventory marketplace, being public implies that there are massive numbers of people that have the motivation to assault the corporate.”

He’s proper on each issues. However this week, as has been the case ahead of, the main cause for Tesla’s fluctuation is Musk himself. 

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