Economy

Tesla shares rise 11 percent after Musk's shocking tweet

Tesla shares rise 11 percent after Musk's shocking tweet

Tesla CEO Elon Musk shocked investors when he tweeted to his 22.3 million followers on Tuesday suggesting the electric vehicle maker could go private at $420 per share, while noting, "funding secured".

The disclosure initially raised questions whether the eccentric Musk was joking, but he then amplified on his plan in a subsequent tweet that said he meant to create a special fund that would allow all current Tesla shareholders to retain a stake in the vehicle maker if they want. It's not clear Musk has the funding to complete the deal, and he would need a majority of shareholders to agree to the plan.

The Wall Street regulator did not immediately respond to a request for comment on Musk's tweet.

Around 4AM AEST on Wednesday, trading of Tesla shares was halted for "pending news". The company had a market value of $58 billion as of Monday's close.

The first tweet came hours after the Financial Times reported that Saudi Arabia's sovereign wealth fund had built a significant stake in Tesla Inc., but it was unclear if that was the funding Musk was referring to.

Yes, Elon Musk is serious about wanting to take Tesla private for $420 a share.

Tesla is the most valuable automaker in the United States, and Musk's fights with investors - specifically short-sellers, who profit when the stock drops - are a running Silicon Valley sideshow.

In a 2013 report, the SEC said companies can use social media outlets to announce important information, so long as they comply with regulations and "investors have been alerted about which social media will be used to disseminate such information".

For current shareholders, Musk said he would institute a provision ensuring that their stock be converted into private shares, adding he would 'ensure their prosperity in any scenario'.

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Last week Tesla said it had achieved its goal of producing 5,000 Model 3 vehicles per week by the end of its second quarter in June, but burned through $739.5m (£565.2m) in cash during the period in order to do it.

"Tesla's volatility makes it more of a trading stock than a value play", said Ihor Dusaniwsky, head of research at S3 in NY. He also suggested the move could only be temporary as he stated "once Tesla enters a phase of slower, more predictable growth, it will likely make sense to return to the public markets".

At midday Wednesday, Musk tweeted that he was "considering taking Tesla private at $420 per share", a premium of about $76 per share, or 22 percent more than the $344 per share where it opened the day.

Third, the intention is not to merge SpaceX and Tesla.

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, and where there is as little change for all of our investors, including all of our employees, as possible.

"This has nothing to do with accumulating control for myself", Musk said in the Tuesday email.

He also emphasised that he hopes all shareholders decide to stay in for the ride and the proposal will ultimately be put to a vote.

Despite the unfolding media "shitshow", Musk still seems to view privatization as an "enormous opportunity for us all".


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