Tesla call options jump on Musk tweet, short-sellers hurt

Elon Musk

Elon Musk

Chief Executive Officer Elon Musk tweeting that he's considering taking the electric-car maker private.

It would cost about $71 billion to take Tesla private at $420 per share.

Two words on Twitter may haunt Elon Musk: "Funding secured". "The stock is worth $570 a share based on 2019 revenue".

Tesla shares were halted from trading at $367.25 United States dollars per share shortly after 2:00 pm for more than an hour after Musk's tweets.

In a blog post on Tesla's website, Mr. Musk said taking Tesla private, in what analysts expect could be the largest leveraged buyout in US history, would allow the company to ignore the pressures of the stock market and focus on long-term plans. Trading in Tesla's stock resumed shortly after the letter's release, and the stock climbed 11 per cent to close at $US379.57.

Asked on Twitter whether Musk would continue to be CEO under such a scenario, he replied there would be "no change".

Mr Musk later brought some clarity to the situation in an email to Tesla employees that was also posted on Tesla's blog.

In July, Model 3 - that comes with a base price tag of $35,000 - not only had the top market share position in its segment in the U.S., but it also outsold all other mid-sized premium sedans combined - accounting for 52 per cent of the segment overall.

Musk has been in a very public battle with these shorts for years. He said his own stake of about 20 percent would not be "substantially different" if the plan were to proceed. He said in his letter to employees that he did not seek to expand his ownership. It was stake of about $1.9 billion to $3.1 billion, or 3-5 percent of Tesla shares, at current share prices. Short sellers borrow shares from other investors and then immediately sell them on the premise that they will be able to buy them back at a lower price later to replace they stock they borrowed.

In another Investopedia article, Why Public Companies Go Private, we lay out some of the straightforward reasons a publicly-traded company would choose to do just that - go private: "An acquisition can create significant financial gain for shareholders and CEOs, while the reduced regulatory and reporting requirements private companies face can free up time and money to focus on long-term goals".

Musk has a long history of bristling at the amount of scrutiny Tesla endures from investors and media.

The stock move could give Tesla some debt relief.

What on earth is happening to Tesla stock today? That came after Musk voiced similar thoughts on Twitter merely an hour earlier, writing: "Am considering taking Tesla private at $420".

Following the company's surge after last week's earnings, Musk took aim again at a short-seller in a reposted short YouTube video that likened these investors to Hitler's last days.

"As the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company", Musk said.

The most obvious equity partners for Musk would be a sovereign wealth fund such as Saudi Arabia's Public Investment Fund (PIF) or major technology investment funds such as SoftBank Group Corp's Vision Fund, bankers said.

Musk did not disclose the source of the funding. Public companies are companies whose shares are available for purchase by anyone on public markets like the New York Stock Exchange and the NASDAQ. The SEC declined to comment on Tesla, but the regulator has previously declined to sanction Netflix CEO Reed Hastings in 2013 for revealing important company information on Facebook.

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