The words of the entrepreneur caused a violent reaction of the market, but, it is possible that he did not act quite legally.
Elon Musk wrote that he intends to make Tesla private when the stock price reaches 420 dollars apiece. After that, the securities of the manufacturer of electric vehicles rose sharply by 7% in a few minutes, and the exchanges suspended trading.
Am considering taking Tesla private at $420. Funding secured.
— Elon Musk (@elonmusk) August 7, 2018
Tesla’s shares began to grow in the morning on August 7, during the opening of trading and against the background of the decision of Saudi Arabia to invest in the company from 1.7 to 2.9 billion dollars. Trades began with a mark of 341.99 dollars per share and first grew to about 358 dollars, and after the tweet Musk reached 367 dollars apiece.
To redeem the company from the stock exchange at a price of $ 420 per share, the Musk will need $ 82 billion. According to the entrepreneur, he already found money for this.
In the next tweets, Musk explained that he did not have a decisive vote in the company, and stressed that “he will not have any of the shareholders” in the event of a change in the status of the company. The entrepreneur intends to create a fund that will allow anyone to finance in Tesla. Such a fund already exists in his other company – SpaceX. Current investors will be offered to either exchange their shares for private ones, or sell them at $ 420 per piece (this is much higher than the market price).
Shortly after the tweet, the Musk of the stock exchange suspended trading in Tesla. As noted in the publication of TechCrunch, it is unclear whether the businessman acted lawfully.
The US Securities and Exchange Commission sometimes allows companies to make important announcements in social networks, but these channels should be known to all investors. In addition, it is usually allowed to make announcements about the financial success of companies, and not about future plans.
For example, in 2012, Netflix CEO Reed Hastings said that subscribers of the service had watched over a billion hours of content. The next year, the SEC clarified that it did not violate the rules and such behavior is acceptable. Unlike the Musk with its 22.3 million Twitter subscribers, Hastings had only 200,000 subscribers on Facebook at the time of the announcement.
It is not yet known what exactly the SEC will decide on the Musk. Its representatives are not available for comment. Companies usually suspend shares in advance of important announcements, which can cause strong fluctuations in the value of securities. The former chairman of the SEC said that tweets Musk can be regarded as fraud, if the data will be untrue.
Soon after the tweet Musk , an official letter from Elon Musk appeared on the Tesla website . In it, he explained the reasons why the company should leave the public markets, but said that the final decision “has not yet been made.”