TESLA TROUBLES: SEC Looking at Musk. “Investors aren’t so convinced that Musk has actually secured funding..” By Todd Horwitz, Bubba Trading

 

U.S. regulators are asking Tesla Inc. whether Chief Executive Elon Musk was truthful when he tweeted that he had secured funding for what would be the largest-ever corporate buyout, people familiar with the matter said. Officials at the Securities and Exchange Commission want to know whether Mr. Musk had a factual basis for tweeting Tuesday that the going-private transaction was all but certain, with only a shareholder vote needed to pull it off, the people said.

The SEC’s inquiries, which originated from the agency’s San Francisco office, suggest Tesla could come under an enforcement investigation if regulators suspect that Mr. Musk’s statement was misleading or false.

“I can’t imagine that the enforcement division hasn’t opened a file, that they are not calling his counsel or him and saying ‘we would like whatever papers you have about this, if you have written anything down, if you have talked to lenders, if you have materials about that we would like to see them,'” said Tom Gorman, a former senior enforcement attorney with the SEC and a partner at Dorsey & Whitney in Washington, D.C. “‘And right after we have finished seeing all that stuff, we would like to talk to you.’ “Investors aren’t so convinced that Musk has actually secured funding. If not, that would spell big trouble for both Musk and his company.

“There is skepticism as to where this money comes from. It doesn’t make sense,” Efraim Levy, an analyst at CFRA, told CNBC. “The reason it is trading at a discount is because of uncertainty as to whether the deal will come to fruition. If it doesn’t come through, the stock is going to crater.” The SEC’s rule 14e-8 basically prohibits publicly traded companies from announcing plans to buy or sell securities if executives don’t intend to follow through, don’t have the means to complete the deal or are flat out trying to manipulate the stock price.
Tesla still hasn’t said where it’s getting the more than $71 billion it would cost to take the company private. Wall Street bankers also don’t know, suggesting Musk has secured financing elsewhere. But that seems implausible given the size of the deal, which would require multiple banks, and cult-like interest in Musk and Tesla, dealmakers and analysts say.

Todd “Bubba” Horwitz

IN ASSOCIATION WITH

Financial Markets & Political Commentary

 

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Todd Horwitz - Author of “Average Joe Options“. Todd began his trading career in 1980 at the CBOE. He was one of the original traders in the OEX & helped start the SPX. He is a member the CME where he trades S&P futures as well as foreign currencies & is a regular contributor to CNBC, Bloomberg, BNN, Fox & many other major news networks.