Tesla’s (TSLA) Stock Takes a Beating Following Musk Reversal

Tesla shares are indicated lower in pre-market trading Monday after Musk said investors have convinced him the company shouldn't go private.

Elon Musk - Tesla Stock TSLA

Reuters reports that Tesla‘s (NASDAQ:TSLA) stock price fell more than 4% in early trading Monday on Germany’s Tradegate exchange, pointing to a TSLA drop when U.S. markets open as investors react to Elon Musk’s course-reversing decision to no longer take the electric carmaker private.

Musk said in a late-night statement on Friday that based on feedback from shareholders who said they have internal rules limiting how much they can sink into a private company, he would no longer pursue a $72 billion delisting deal.

“Given the feedback I’ve received, it’s apparent that most of Tesla’s existing shareholders believe we are better off as a public company. There is also no proven path for most retail investors to own shares if we were private,” Musk wrote.

“Although the majority of shareholders I spoke to said they would remain with Tesla if we went private, the sentiment, in a nutshell, was ‘please don’t do this'”.

Musk set off a firestorm on Aug. 7 after tweeting he was considering taking the company private. TSLA initially popped more than 11% above the previous day’s close to $380. Since then, however, Tesla’s stock has traded as high as $387 and as low as $288, knifing below its 50-day and 200-day line, and far short of the $420 a share cash-out price Musk proposed.

Tesla stock is down less than 5% in pre-market trading Monday. It closed up 1 percent to $322.82 during Friday’s regular session.

Had it materialized, Musk’s go-private deal would have ended Tesla’s eight year history as a publicly traded company. Tesla’s initial stock offering was at $19 a share on June 29, 2010.

Musk and Tesla Face a Number of Lawsuits

Musk and Tesla face a series of investor lawsuits including misleading the market to artificially inflate Tesla’s stock price and an investigation by the US Securities and Exchange Commission looking into the accuracy of Musk’s tweet and whether the Tesla boss violated securities laws by claiming he had secured funding.

Corporate governance experts say that the contradiction between Musk’s ‘funding secured’ tweet and a statement that Saudi Arabia’s sovereign wealth fund had expressed support for the private plan subject to due diligence could be used to show Musk misled investors.

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