Tesla’s (NASDAQ:TSLA) CEO Elon Musk is in Deep Legal Peril Over ‘420’ Buyout Tweet
Tesla’s (NASDAQ:TSLA) CEO Elon Musk could be hit with civil and criminal penalties if he did not shore up the $72-B in financing before Tweeting about possibly going private with his auto company
Former Securities and Exchange Commission Chairman Harvey Pitt told the business news media Wednesday.
“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.”
Mr. Pitt added: “There’s enough here for people to ask questions. Whether or not he has done anything illegal is not certain.”
Tesla did not immediately respond to my request for a comment.
Tuesday, CEO Musk Tweeted about possible plans to take the company private at 420/share.
Mr. Musk shocked the market, again with a Tweet that he is considering taking his cash burning, loss-making EV company private at 420/share and trading was halted on the NASDAQ.
“Given the haphazard process of disclosure last afternoon, our initial impression was that Elon Musk sprung his plan of going private upon the public without consulting Tesla’s board of directors or major shareholders,” Bernstein analysts said in a note titled “Going private? Who knows… does Elon?”
Most analysts are skeptical.
Some said a deal could materialize if Mr. Musk succeeds in lining up the right funding, but that seems unlikely since Wall Streets banks are not likely to participate
The company already has a $2-B investment from Saudi Arabia’s sovereign fund as well as Tencent, which took a 5% stake in 2017.
“Elon’s tone and messaging regarding a potential transaction lead us to believe that there might be significant outside funding lined up,” RBC analysts said.
Tesla’s stock has swung wildly in the past several years, hit by the company’s ‘Production Hell’ issues as well as Mr. Musk’s explosive remarks on Twitter that have turned serious off investors.
To take Tesla private, Mr. Musk would have to pull off the largest leveraged buyout in history, surpassing Texas electric utility TXU’s in Y 2007.
Tesla does not fit the typical profile of a company that can raise tens of billions of dollars of debt to fund such a deal.
If he has not got the money in place he will come under much more pressure that he has ever been.
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