DETROIT (AP) – At first it was the shocking tweet that the funding was secured and Tesla might go private, and then a statement that the money was not locked up. Two weeks later it is never bad, the whole deal is turned off.
Welcome to the disorder of Elon Musk, the impulsive genius and architect of advanced car, rocket and solar panel companies that have been almost completely rebuilt.
Chaos, however, has a prize. Experts say that it could all happen that Tesla is exposed to a fine for misleading investors. And although Musk almost has a legendary status, the episode could further erode its credibility with stakeholders who have withstood several broken promises and years of losses as a government company.
& # 39; & # 39; Prior to the go-private episode, his credibility was at stake, although investors still generally had confidence in the man & # 39 ;, #, said Erik Gordon, a professor of law and business at the University of Michigan. , Saturday. & # 39; & # 39; This whole go-private episode has given its credibility almost zero. & # 39; & # 39;
The bizarre story started on 7 August when Musk tweeted while driving to the airport that he was considering taking the company privately and that the financing was set for the deal. Investors would receive $ 420 per share, a premium of 23 percent compared to the closing price of August 6th. No other details were given, but the shares of Tesla shot up 11 percent that day. At $ 420, buying all Tesla shares costs about $ 72 billion.
Then, six days later, in a blog post, Musk wrote that the money was not locked and that Saudi Arabia's public investment fund was the source of the money but still doing due diligence. Musk said that the Tesla board and some large investors were told that he was considering taking the company privately before tweeting that information. He said that he had tweeted the disclosure so that everyone could have the information.
Musk, who owns 20 percent of Tesla, also said he expected only a third of the shareholders to sell, meaning the deal would be worth about $ 24 billion.
At the end of Friday there was a statement from Musk that, after talking with investors, the plan to go private would be scrubbed. Large institutional investors told him that they had limits to how much they could sink into a private company.
The episode attracted the attention of the US Securities and Exchange Commission, which allegedly investigates Tesla for possible manipulation of the share price. At least two lawsuits seeking a class-action status were also filed because Musk violated the securities laws by making it sound as if funding for the buy-out was in the queue.
James Cox, a professor at Duke University who specializes in corporate governance and securities laws, said it forbids companies to make misleading statements that influence the markets.
& # 39; & # 39; The fact that he is now so rapidly deteriorating, within a few weeks, indicates the insincerity in which the first statement was made, & # 39; & # 39; Cox said.
Although Musk announced the possible redemption on August 7, he did not reveal all unforeseen events, including those of the Saudi fund, "said Peter Henning, a professor at Wayne State University Law and a former SEC lawyer. "I think his most recent statement shows that this was not thought through," Henning said. & # 39; & # 39; The SEC will be concerned about that, because investors can be misled, with incomplete information. & # 39; & # 39;
The SEC will probably also look at Musk's disclosure to some investors for others, which is also prohibited if there is reason to believe that investors could trade shares based on the information, Cox said.
Call the whole thing off, however, can also be a defense for Musk, Henning said. "He might say that I was just testing the waters. I just thought out loud, so it was not my intention to deceive anyone at this point. & # 39; & # 39;
Normally, if a company planned a plan to go private, the CEO would inform the board and a process would be set up to evaluate the move, says Henning. Lawyers would be involved and it would be disclosed to the SEC in an application.
Cox predicts that Tesla will settle with the SEC, pay a fine and agree not to violate securities laws in the future.
On top of all this drama, Musk revealed last week in an interview with the New York Times that he was stressed by trying to meet production goals with a long delay for the Model 3 mass market electric car. He said that he was working 120 hours a week and that he had to take Ambien to sleep.
Investors remained with the company, although shares have been withdrawn since the start of 7 August. They closed Friday at $ 322.82, 6 percent below the opening price on the day of the tweet.
Tesla did not comment on Saturday. Six board members said Friday evening in a statement that the board supports Musk as Tesla.
Some bullish investors still say that Tesla has great growth potential. Last week, shareholder ARK Invest wrote to Musk to encourage him to keep the company public and say that $ 420 per share is too low. But Consumer Edge analyst Jamie Albertine, who was a Tesla optimist, lowered his rating to the company last week and urged the board to attract an experienced manager to help manage it.
On Saturday, Albertine said that while earnings for the second quarter showed positive trends, the events of the past weeks & # 39; & # 39; enough to make us uncomfortable. & # 39; & # 39;
Candice Choi, author of Associated Press in New York, contributed to this report.