Tesla (NASDAQ:TSLA) CEO Elon Musk’s Star Burned Up on the ‘420’ Tweet
- Men do not like cars that are conceived as household appliances
Late Friday in a blog pose, Elon Musk wrote that he had the explosive ‘420’ notion that stunned investors and drew intense regulatory scrutiny while driving to the airport on Monday, 7 August.
Mr. Musk and Tesla also face a series of investor lawsuits and a US Securities and Exchange Commission investigation into the accuracy that Mr. Musk’s ‘420’ Tweet where he declared that funding for the deal was “secured”.
In a very carefully worded statement Mr. Musk wrote Friday that he abandoned the ‘420’ bid based on feedback from shareholders and because the effort was proving to be more time-consuming and distracting than anticipated.
Mr. Musk owns about 20% of Tesla, he said earlier that he saw taking the company private without the standard method of a leveraged buyout, in which all the other shareholders would cash out and the deal would be funded primarily with new debt.
But, Friday, Mr. Musk said that his company’s institutional shareholders explained that they have internal compliance issues that limit how much they can invest in a private company. He also admitted that there was no proven path for most retail investors to own shares were Tesla to go private.
That written statement on his blog, contrasts sharply with his 7 August Tweet, when he Tweeted this, “investor support is confirmed.”
Corporate governance experts weighing in said Mr. Musk’s handling of the take-private bid could pressure the Board currently made up by his relatives and friends to assert its independence and consider ways to rein him, or expunge him completely.
In explaining his reasons to take Tesla private earlier this month, Mr. Musk cited pressure from short sellers, meaning investors who look to profit on bets that a company’s stock will decline.
Some short sellers were emboldened by Mr. Musk’s retreat back to public from private by correctly noting it show Mr. Musk was nowhere near as close to taking the company private as he claimed in the ‘420’ Tweet.
Jim Chanos of Kynikos Associates, which has been shorting Tesla, said Saturday: “The corporate governance disaster that is Tesla continues. Keep in mind that Musk informed the board Thursday, according to his Friday night post.”
Mr. Musk continue that his company does not need money, yet Citigroup (NYSE:C) analysts said just after the ‘420’ Tweet earlier this month that if the go-private transaction collapses , “It would be wise for Tesla to at least try to raise significant new equity capital sooner rather than later,” so it can inspire investor confidence.
Tesla shares closed at 322.82 Friday.
Officials at T. Rowe Price Group and Fidelity Investments 2 Top Tesla shareholders were not available for comment.
HeffX-LTN’s Overall outlook for Tesla is Neutral to Bearish now, we wait to see what happens on Monday.
Have a terrific weekend.