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What Is Happening With Tesla?

From email leaks to a possible SEC investigation and foiled merger, Tesla ( TSLA ) and its CEO, Elon Musk, have had a rough couple of weeks. Here is what is going on.

A Leaked Email Muddles This Quarter's Results

Bloomberg published a report last week that included a leaked company-wide email that Musk had sent to employees. It outlined his priority of manufacturing a solid quarter ahead of a planned cash raise. Better-than-expected results would assumedly help it raise more funds at a lower cost.

Here are the important sections of Bloomberg's report:

Elon Musk sent an e-mail to employees at Tesla Motors Inc. urging them to cut costs and deliver

Musk also presses his employees to cut costs, even if it is just for the next few weeks. Afterwards, the quarter will end and cash can be raised on the inflated results.

The e-mail says that Tesla is

A Possible SEC Probe?

Seperately, many investors are worried that Musk risked an investigation into its planned merger with SolarCity ( SCTY ) due to questions sorrounding his personal stock transactions.

It was recently revealed that Musk suggested to his cousin, Lyndon Rive (CEO of SolarCity), that their two companies should merge. The discussions were reportedly held in February. On Feb. --, Musk and his cousins purchased roughly $-…… million of SolarCity stock. Many have argued that the transactions could be considered insider trading. Still worse, three months later, Tesla sold several million shares of stock, failing to disclose a possible acquisition of SolarCity.

Interestingly, the Tesla board did not even give Musk approval for the deal due to "the potential impact on Tesla management's time and resources in light of Tesla's execution of ongoing operational and strategic initiatives, including Tesla's ongoing production ramp of its Model X vehicle".

Buy the Dip?

In the past month, Tesla shares are down --%. Year to date, that loss is closer to -6%. The pullback has caused some Wall Street analysts to propose buying beaten-down shares.

"Headlines have been dominated by concerns over Tesla's need for a capital raise and near-term liquidity constraints, but these are not new developments," said Baird analyst Ben Kallo. "We believe that recent pressure is overblown and would be buyers on any weakness." He also disagrees with the idea that SolarCity would go insolvent were it not for Tesla's merger proposal.

Kallo reiterated his 'Outperform' rating and $''8 price target, suggesting roughly 67% upside.

Disclosure:I have no positions in any of the stocks mentioned above and no intention to initiate a position in the next 7- hours.

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This article first appeared on GuruFocus .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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