Dividends and Musk faces trail over tweet about taking Tesla private

On Wall Street there are financial regulations which tries to make the trading of stocks reasonably fair for investors of all sizes. In reality, the greater your access to capital, the more likely the President or CFO will return your call. However all public companies tend to put out press releases to state something material will happen at some time before or after the trading day. In this fashion, if you are interested in that particular stock, you can read the transcript or hear what the person has to say and make your decision. The larger your access to capital, the greater the opportunity for the company to ensure someone in the organization is on the call.

In an article from Peter Eavis and Kalley Huang of the New York Times News Service, in the era of social media, in 2018 Elon Musk sent a claim that he had financing to take Tesla private at $420 a share. The shares were trading in the $375 area which means it was a 20% premium.

On that day, investors reacted with more than 29.8 million shares traded, much higher than the normal 8.85 million.

Mr. Musk had sent the notice via his Twitter account, which has a lot of followers and mentioned he had secured financing. The deal for the total number of shares would total $71 billion. The buyout when compared to the previous largest at $32.11 billion would be larger.

In a normal takeover, a company would have gone to various investment banks to line up access to credit, what type of lending facilities, and to potential large buyers of stock to show how his company has a terrific future ahead just as a private company rather than a public company. As well, the various law firms would be engaged and there are many which specialize in mergers and acquisitions to be on the correct side of the law. For Mr. Musk he talked to one buyer – Saudi Arabia’s Public Investment Fund.

If you watch and rarely participate in the action of stocks worth less than the price of hamburger, depending on the flavor of Wall Street, news releases are sent on a weekly and sometimes daily basis which are less than half true. The promoters push up the price of the stock, sell and wait till the next time the flavor is popular. For example, it is not impossible to find gold in mining companies, the really difficult part is finding a gold mining company that can find gold at commercially viable deposit. At the moment, the flavor is AI but it will change in a month.

What actually happened late in August of 2018, Mr. Musk said the company would not go private and remain public. This led to institutions running to the SEC saying they should be compensated for buying Tesla shares. They want money from Mr. Musk. Mr. Musk has to prove he really had access to the funds or secured the funds or face penalties including fines and for a time, Mr. Musk stepped down as Chair as well as he needed a lawyer to review his tweets.

Linking to dividend paying stocks, there are rules and regulations to make the markets reasonably fair to all investors. When people break the rules, penalties come forth – from fines, to losing face, to having to regain trust again. Ideally, it should rarely happen with a large dividend company because they know and follow the rules. If you see you company not following the rules, it is time to find alternatives.

There are more questions than answers, till the next time – to raising questions.


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