Even as the share price of the US based electric car maker Tesla dropped significantly after the news that the US SEC has filed a case against company CEO and founder Elon Musk on charges o committing fraud, analysts at Wall Street were busy ascertaining the worth of the company minus Musk.
There was a 14 per cent drop in the shares of the company on Friday on worries about the exit of Musk from the company.
Tesla has been using up huge piles of cash for its production of electric cars which have failed self imposed production targets by Musk. The Tesla woes have been blamed on short-sellers which are investors who bet on a collapse of the share price of the company to make profits.
Musk claimed to have found in August and suggested of taking the company private. “Am considering taking Tesla private at $420. Funding secured” he wrote in a tweet which has now become infamous.
But according to the SEC, that statement by Musk was false and that Musk followed that up with a series of “materially false and misleading statements”.
The SEC said in its lawsuit that Musk “knew or was reckless in not knowing” that his statements were false or misleading instead of him knowing that he had an offer. “In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source,” the SEC said.
The tweet of quoting $420 a share for taking Tesla private by Musk was also according to the SEC because the number was based on joke instead of a spreadsheet.
“According to Musk, he calculated the $420 price per share based on a 20% premium over that day’s closing share price because he thought 20% was a ‘standard premium’ in going-private transactions. This calculation resulted in a price of $419, and Musk stated that he rounded the price up to $420 because he had recently learned about the number’s significance in marijuana culture and thought his girlfriend ‘would find it funny, which admittedly is not a great reason to pick a price’.”
The SEC also wants Musk removed the company he had founded. However it is believed that Musk strongly believes that without him at the helm, Tesla cannot function.
The possible outcome of the SEC case has created a rift of o[pinions among analysts.
The chance that Musk would remain the Tesla CEO is 50/50 following the resolution of the issue with the SEC “and an even greater chance he remains involved somehow with Tesla in any case”, says Gene Munster, managing partner at Loup Ventures.
“As demonstrated by the stock’s reaction, investors believe the removal of Musk from Tesla would be negative for the prospects of the company, despite his recklessness in the go-private tweets. If the SEC is granted its request to remove Musk, there’s a question as to whether they’re doing more to harm continuing shareholders or protecting them, at least in the eyes of the market,” he wrote in a note to investors. He believes a substantial fine is the most likely outcome.”
There is less optimism for Gordon Johnson, an analyst at Vertical Group. He said on TD Ameritrade Network, that there was evidence of “clear manipulation”. The investors have been blinded about the “horrendous” fundamentals at Tesla by the vision of a brighter future as shown by Musk.
“The point is, there’s always this carrot that Elon Musk is dangling out in the future of something that is going to take this company to nirvana, if you will, and he consistently misses it,” he said.
(Source:www.theguardian.com)
There was a 14 per cent drop in the shares of the company on Friday on worries about the exit of Musk from the company.
Tesla has been using up huge piles of cash for its production of electric cars which have failed self imposed production targets by Musk. The Tesla woes have been blamed on short-sellers which are investors who bet on a collapse of the share price of the company to make profits.
Musk claimed to have found in August and suggested of taking the company private. “Am considering taking Tesla private at $420. Funding secured” he wrote in a tweet which has now become infamous.
But according to the SEC, that statement by Musk was false and that Musk followed that up with a series of “materially false and misleading statements”.
The SEC said in its lawsuit that Musk “knew or was reckless in not knowing” that his statements were false or misleading instead of him knowing that he had an offer. “In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source,” the SEC said.
The tweet of quoting $420 a share for taking Tesla private by Musk was also according to the SEC because the number was based on joke instead of a spreadsheet.
“According to Musk, he calculated the $420 price per share based on a 20% premium over that day’s closing share price because he thought 20% was a ‘standard premium’ in going-private transactions. This calculation resulted in a price of $419, and Musk stated that he rounded the price up to $420 because he had recently learned about the number’s significance in marijuana culture and thought his girlfriend ‘would find it funny, which admittedly is not a great reason to pick a price’.”
The SEC also wants Musk removed the company he had founded. However it is believed that Musk strongly believes that without him at the helm, Tesla cannot function.
The possible outcome of the SEC case has created a rift of o[pinions among analysts.
The chance that Musk would remain the Tesla CEO is 50/50 following the resolution of the issue with the SEC “and an even greater chance he remains involved somehow with Tesla in any case”, says Gene Munster, managing partner at Loup Ventures.
“As demonstrated by the stock’s reaction, investors believe the removal of Musk from Tesla would be negative for the prospects of the company, despite his recklessness in the go-private tweets. If the SEC is granted its request to remove Musk, there’s a question as to whether they’re doing more to harm continuing shareholders or protecting them, at least in the eyes of the market,” he wrote in a note to investors. He believes a substantial fine is the most likely outcome.”
There is less optimism for Gordon Johnson, an analyst at Vertical Group. He said on TD Ameritrade Network, that there was evidence of “clear manipulation”. The investors have been blinded about the “horrendous” fundamentals at Tesla by the vision of a brighter future as shown by Musk.
“The point is, there’s always this carrot that Elon Musk is dangling out in the future of something that is going to take this company to nirvana, if you will, and he consistently misses it,” he said.
(Source:www.theguardian.com)
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