Elon Musk Pays Up!

Buys His Way Out Of Trouble!
Steps Down As Chairman Of Tesla!

by Ian Harvey

October 01, 2018

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As mentioned in the previous article “Profiting From The Elon Musk Saga!” we would keep traders advised as to any major changes. Elon Musk and Tesla have agreed to pay a total of $40 million and make a series of concessions to settle a government lawsuit alleging Musk duped investors with misleading statements about a proposed buyout of the company. Trading at the opening on Monday morning will be interesting as it may give us some direction as to Tesla shares movement - is this move of Musk stepping aside as Chairman beneficial to the company, or not?

SO, IT IS OBVIOUS

THAT MONEY CAN BUY YOUR WAY OUT OF TROUBLE!

And What Now?…..

Tesla will now need to hire an independent chairman to oversee the company, but the settlement will still allow Musk to remain CEO of the electric car company; and will require him to relinquish his role as chairman for at least three years.

"The resolution is intended to prevent further market disruption and harm to Tesla's shareholders," said Steven Peikin, co-director of the SEC's Enforcement Division.

The Result…..

The value of Elon Musk's Tesla holdings took a hit on Friday, of $1.44 billion.

The company's stock closed at $264.77 per share, down 13.9 percent from $307.52, where it closed on Thursday. 

Tesla's total market value lost $7.293 billion in Friday trading.

Previously, on the day Musk made the surprise announcement when Musk tweeted - August 7, 2018 - that he could take Tesla private at $420 per share — a substantial premium to its trading price at the time — that funding for the transaction had been secured, and that the only remaining uncertainty was a shareholder vote. Tesla's stock surged by over six percent — catching off guard the bearish class of investors with whom the billionaire has crossed swords in the past.

Consequences of the Deal…..

Investors have been concerned about the company’s ability to cope without Musk, and now, this situation has been removed. Many analysts have predicted that the shares were bound to fall even further if Musk was forced to step down.

But, on the other-hand, other analysts believe that a more steady influence at the helm would be more profitable to Tesla, and its share price. An example of this could be found in the previous article where Gene Munster, a managing partner at the venture capital firm Loup Ventures, believes that could be good news for Tesla.

Munster said the SEC's lawsuit against Musk, which alleges Musk made "false and misleading" statements in August about the possibility of taking Tesla private, will be "slightly disruptive" for Tesla in the next few months as the company seeks to stabilize its production and delivery infrastructures while beginning to deliver consistent profits.

But beyond the next six months, the SEC's lawsuit could work to Tesla's advantage.

Conclusion…..

There is no conclusion at this point-of-time. Monday morning trading may help give us a more clear path as to the direction of the stock; and from this we may be able to decide on how we approach future trading on Tesla stock!

And again, stay tuned!


Best of Trading,
Ian Harvey
Director of Stock Options Made Easy


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