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Tesla board evaluating CEO's bid to take company private

Tesla board evaluating CEO's bid to take company private

The Wall Street Journal writes that the SEC has made inquiries to Tesla in relation to Musk's tweets about taking the company private, while regulators are working to determine if the erratic billionaire's statements on the matter were "truthful".

In a note to clients, Morgan Stanley analyst Adam Jonas said Musk's strategy to reveal the offer on Twitter might end up costing him in higher costs and financial risk.

In a letter after his tweet on Tuesday, Musk fleshed out his idea, suggesting shareholders would get the option to sell their shares for $420 each or remain investors in a private Tesla, out of the glare of Wall Street and its need for positive quarterly results. Musk, on Tuesday, announced he was mulling buying the company out for $420 per share.

Tesla stock, which has been on the rise for days, skyrocketed after the tweet and ended Tuesday up 11%.

In a letter to shareholders after his tweet on Tuesday, Musk fleshed out his idea, suggesting they would get the option to sell their shares for $420 USA each or remain investors in a private Tesla, out of the glare of Wall Street and its need for quarterly results. Tesla's stock backtracked by more than 2 percent to close at $370.34.

Tesla shares fell as much as 3.4 per cent to US$366.52 before the start of regular trading, though they pared declines after the board statement. He said funding was "secured", without elaborating.

Follow Tesla's stock price in real-time here. Many initially thought it was Elon Musk's attempt at a bad joke about marijuana, because "420" has always been associated with pot.

Bernstein analyst Toni Sacconaghi said Musk's statements puts Tesla under pressure to detail how it intends to proceed with the deal to go private.

News of the potential buyout already has stung investors known as "short sellers" who have always been a thorn in Musk's side.

Musk holds "about 20 percent of the company now", the statement said, and made clear that he doesn't see that changing whether Tesla is private or public. "This is very haphazard and raises, in my view, serious questions about why he would choose to do things in exactly this way".

But if the buyout flops, Musk and Tesla will likely face class-action lawsuits from shareholders alleging they were duped, and potential legal trouble from the Securities and Exchange Commission, too. Musk estimates that selling or buying opportunities would be possible once every six months or so.

"Distraction or not, the move feels right even if Musk is downplaying how supportive public markets have been". "Your disclosures should create certainty in the market so that everyone has a fair and complete understanding of what is going on", Goody said.

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