Tesla shares fall 5% on Wall St. skepticism, SEC probe reports



One of the biggest questions surrounding the buyout is Tesla's long history of losing money while it has been investing in electric auto technology and ramping up production of its vehicles. He looked no further than his rocket company - Space Exploration Technologies Corp. - for a way to keep Tesla shareholders onboard.

In an internal letter to Tesla employees, Musk confirmed he was considering taking the company private in order to free it from "short-term thinking" and other "distractions".

Reflecting shareholders' expectations that Tesla will grow its production exponentially, its market capitalisation is equivalent to about $626,000 for every auto it sold past year, compared to GM's valuation of about $5,500 per vehicle it sold. "Funding secured", Musk tweeted, without elaboration or any corroboration from the company.

Shares of SpaceX in the private market have risen in value in the past few years - from about $77 a share in 2015 to $169 as of April, according to SharesPost.

Judith Burns, an SEC spokeswoman, declined to comment. At the same time, Musk's behavior could easily be framed as illicit stock market manipulation.

If the board launches a formal review of Musk's bid, he would have to recuse himself, or a special board committee would have to be formed, according to the sources, who requested anonymity because the deliberations are confidential.

"If you are a believer in Elon, I would continue to hold onto those shares", said Michael Jurasic, a securities attorney at Ropes & Gray, who added that it's unclear exactly how Tesla's buyout would work. "I wish we could be private with Tesla", he told Rolling Stone in an interview published in November. Most recently, Muskk had the tech and automotive worlds scratching their collective heads after tweeting that he would consider taking Tesla private should the stock reach $420 a share.

Tesla has many mom-and-pop investors. And that doesn't include Tesla shareholders who hold their stock under the name of their bank or brokerage, a figure that is "substantially greater" than the one for shareholders of record, Tesla filings say.

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Tesla Inc.'s (TSLA) board plans to meet with financial advisors next week to formalize a process to explore Elon Musk's proposal to take the automaker private, people familiar with the matter told CNBC.

"If (Musk's) motive was frustration with short sellers, then that could be a case of market manipulation", Coffee said.

Meanwhile, Tesla has announced plans to build a factory in Shanghai, China, and another in Europe, but details are scarce and funding unknown.

Musk's tweets about how Tesla could structure the deal has left $370 billion asset manager Janus Henderson Group Plc perplexed.

"It's very obvious that Musk did not talk to any lawyers before he made his tweet", said John Coffee Jr., a Columbia University law professor and corporate-governance expert.

Now, several days later, CNBC reports thatthe board of directors at Tesla has scheduled a meeting with financial advisers next week to discuss the possible costs and benefits to actually following through on Musk's brash tweets.

The chief executive officer raised the go-private possibility with the board last week, according to a statement from six of Tesla's nine directors.

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