Board members want Elon Musk to stop tweeting, as his grandiose and ambiguous messages do not contribute to the price increase of TSLA shares. The ongoing drama, that has devoured the scandalous automotive manufacturer in the recent days, has left Tesla investors worried and disappointed. Elon Musk has previously expressed his desire to make Tesla a private company. As became known later, with a little help from the Saudi Arabian sovereign wealth fund.
“Going back almost two years, the Saudi Arabian sovereign wealth fund has approached me multiple times about taking Tesla private,” said Musk in a blog post. “Recently, after the Saudi fund bought almost 5 percent of Tesla stock through the public markets, they reached out to ask for another meeting. That meeting took place on July 31st. … I left the July 31st meeting with no question that a deal with the Saudi sovereign fund could be closed.”
In accordance with the American legislation, publicly traded companies cannot communicate their willingness to manipulate shares until there is a real intention to do so. Tesla, therefore, may face charges from the United States Securities and Exchange Commission (SEC). An ill-fortuned message may cost the company dearly, should Tesla be found guilty.
There is little doubt that both the announcement to make the company private and the ongoing SEC investigation will move the TSLA stock in the coming days. And while an acquisition at the above-the-market price (Musk will be offering $420 per share) is a good thing for Tesla, the investigation can cause Tesla shares to depreciate.
Tesla was traded at around $350 before the announcement. Once a privatization plan was released the price surged to $380 per share only to drop back to $338 several days later, which is lower than on this day a year ago. Scandals, surrounding the company, are not the only source of distress for existing and potential investors. It looks like Tesla has a hard time keeping up with a production plan, constantly underperforming and offering below the average quality.
From the point of view of a value investor (Warren Buffett and alike), a company with stable negative earnings is not worth your money. Still, Tesla has demonstrated decent growth over the course of 5 years despite its inability to turn profit.
