Tesla shares dip after Elon Musk proposes going private

Tesla and SpaceX CEO Elon Musk at a SpaceX press conference in Cape Canaveral Fla. on Feb. 6 2018. More

Tesla's 27% surge this month, fueled by Elon Musk's cryptic tweet Tuesday about taking the company private at $420 per share, has cost short sellers - or those investors betting against Tesla's stock - at least $3 billion since, according to data from financial-analytics firm S3 Partners.

They said the board also addressed the issue of how to fund such a deal, but gave no details.

The Tesla board responded to the proposal earlier Wednesday morning, indicating that it is evaluating things.

Teresa Goody, a former SEC official, said Musk "did something inappropriate and caused chaos in the market" in a way that would likely draw scrutiny from investigators.

On Tuesday, Musk revealed on Twitter that he was considering privatizing the company after taking it public in 2010.

Shares of Tesla, up 1.6% in the past year, fell almost 1% in early trading Wednesday.

Neither Elon nor Tesla has said yet where it's getting the money to go private.

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Cowen analyst Jeffrey Osborne told clients in a note Wednesday that he didn't believe Tesla's current business "support a valuation anywhere close to $420 per share".

Harvey Pitt, a former chair of the Securities and Exchange Commission, said Musk's asserting a final sale price and that funding was "secured" opened him to potential charges of stock manipulation or securities fraud.

China's Tencent Holdings Ltd, which took a 5-percent stake in Tesla a year ago, could also be a possible partner.

Two of the potential stumbling blocks to Musk's plan include the stock price premium not being enough to get the existing shareholders on board to support the sale and coming up short on the announced funding to complete the transition.

The six board members who issued the statement on Wednesday included James Murdoch, chief executive of Twenty-First Century Fox Inc. and Brad Buss, who was the chief financial officer of solar panel maker SolarCity until it was bought by Tesla in 2016. Musk's money-losing and cash-burning company is an unlikely candidate for debt investors to be willing to help go private.

"They're being bombarded with questions that we don't think are as relevant to the long-term value of the company", said Sam Korus, an analyst for ARK Investment Management, which had 443,874 Tesla shares as of June 30.

Former SEC chair Harvey Pitt told CNBC that while the United States stock market regulator permits executives of publicly listed companies to use social media to make statements about their businesses, Musk's tweet was still "highly unprecedented".

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