Personal Finance

Why Tesla Stock Fell Today

Front view of the new Tesla Roadster

What happened

Shares of electric-car maker Tesla (NASDAQ: TSLA) have fallen today, down by 6% as of 3 p.m. EDT, after The Wall Street Journal reported that the SEC was probing CEO Elon Musk's comments on social media. Regulators want to know if Musk was misleading investors.

So what

Earlier this week, Musk announced on social media that he was " considering taking Tesla private at $420 " and that he had already secured funding for a potential deal, leading to shares skyrocketing -- and briefly being halted -- on Tuesday. Seeing as how any such deal would be the largest leveraged buyout (LBO) ever made, plenty of questions have arisen as to where Musk could procure that kind of money. However, the SEC is less concerned about the details of the deal, and more interested in whether Musk was misleading investors.

(Ironically, going private would reduce regulatory scrutiny of Tesla, although would not completely remove oversight.)

Front view of the new Tesla Roadster

Image source: Tesla.

Now what

Musk has a long history of trolling short-sellers, making esoteric jokes and off-the-cuff comments, and otherwise saying inappropriate things on social media. Many have speculated that the reference to a take-out price of $420 per share is a veiled marijuana joke. Tesla subsequently shared an internal email that Musk sent that provides a little bit more detail about what the eccentric billionaire is planning, which gives credence to the idea that the company is seriously contemplating going private. Tesla's board (excluding Musk's brother Kimbal and Steve Jurvetson, who is on leave following sexual harassment allegations) has also confirmed that it is discussing the possibility.

If Tesla can provide sufficient documentation that Tesla is serious about going private and that the whole narrative isn't merely a social media hoax, it should be able to satisfy regulatory inquiries. But investors will still want to know where all that money will come from.

10 stocks we like better than Tesla

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Tesla wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of August 6, 2018

Evan Niu, CFA owns shares of Tesla. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy .

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.

In This Story

TSLA

Other Topics

Stocks

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More