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Tesla founder Elon Musk faces scrutiny over tweets about taking company private

The SEC sees warning signs and wants Musk to make his intentions fully known

Photo via Twitter
Tesla CEO Elon Musk’s Twitter posts on Wednesday may have raised the SEC’s (Securities & Exchange Commission) eyebrows.

In a Tweet storm that began at 9:48am with ‘Am considering taking Tesla private at $420. Funding secured,” Musk continued to let all the cats out of the bag over the next three hours in a total of six tweets that were retweeted some 21,000 times.

Musk is notorious for waving his toe over the proverbial line. From poo-poo’ing government rules about releasing details of the crash involving a Tesla vehicle to insensitive comments accusing the diver who saved the cave-trapped kids in Thailand of being a pedophile, Musk’s comments can run wild and loose.

This time is no different, but the SEC takes matters like this seriously. The Wall Street Journal said federal regulators immediately called Musk on the carpet, asking if he was truthful when he tweeted out that he had already locked in the funding for this mammoth of a corporate buyout.

Musk spells it out

“...a final decision has not yet been made, but the reason for doing this is all about creating the environment for Tesla to operate best,” Musk followed up his Tweetfest in a memo to employees.

“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. Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term. Finally, 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.”

It’s clear the Tesla chief thinks that this deal is the right thing to do.

“I fundamentally believe that we are at our best when everyone is focused on executing, when we can remain focused on our long-term mission, and when there are not perverse incentives for people to try to harm what we’re all trying to achieve,” Musk continued.

The cornerstones of Musk’s plan are:

  1. A structure where all shareholders have a choice. Either they can stay investors in a private Tesla or they can be bought out at $420 per share, which is a 20% premium over the stock price following the Q2 earnings call (which had already increased by 16%).

  2. All Tesla employees will be able to remain shareholders of the company. If Tesla goes private, employees would be able to sell their shares and exercise their options.

  3. Not merging SpaceX and Tesla. As Musk sees it, those two ventures would continue with separate ownership and governance structures.

One for all… and all for Musk?

Musk was quick to point out that this new plan is not about giving himself more control over Tesla. He reiterated that company shareholders would be the final decision makers.

“I own about 20% of the company now, and I don’t envision that being substantially different after any deal is completed,” the CEO said.

“This proposal to go private would ultimately be finalized through a vote of our shareholders. If the process ends the way I expect it will, a private Tesla would ultimately be an enormous opportunity for all of us. Either way, the future is very bright and we’ll keep fighting to achieve our mission.”

The public -- or, at least, those who follow Musk -- apparently agree with the plan. In a Twitter poll put out by the Electrek.Co., more than 85 percent say they’re in favor of Musk’s proposal.

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