- Elon Musk was thinking like a casino operator when he infamously tweeted that he had “funding secured” to take Tesla private, he told the Wall Street Journal.
- The CEO of the electric-car company, Musk believed the odds were in his favour.
- It’s not clear what, specifically, he thought was likely to happen – going private, getting the funding, or the per-share price that would be paid to shareholders.
- Musk’s tweet is now the subject of an inquiry by securities regulators.
When Elon Musk tweeted his infamous “funding secured” comment, he was apparently thinking like a casino operator.
Musk, the CEO of Tesla, posted the line earlier this month in a tweet about potentially taking the company private at $US420 a share. Just like a gambling house, the odds were likely in his favour, he told the Wall Street Journal for a story it published Friday.
“If the odds are probably in your favour, you should make as many decisions as possible within the bounds of what is executable,” Musk told the Journal. He added: “This is like being the house in Vegas. Probability is the most powerful force in the universe, which is why the house always wins. Be the house.”
Musk apparently didn’t explain what exactly he meant that the probability was on his side – he didn’t clarify whether he was talking about the likelihood that Tesla would go private, whether it actually had the funding to do so, or whether it could be done at the $US420 a share price he stated. In a statement a week after his tweet, Musk explained that he had a conversation at the end of July with the managing director of Saudi Arabia’s sovereign-wealth fund that led him to believe that he had the support and financial backing of the fund to take Tesla private.
Tesla’s stock spiked upward after his “funding secured” tweet. When it became clear in the days following Musk’s that he didn’t actually have a signed deal or cash in hand to take the company private, the company’s stock plunged. He’s since said that he wants Tesla to remain a public company.
Musk’s tweet is the subject of an inquiry by regulators
His tweet is now the subject of an inquiry by the Securities and Exchange Commission. The inquiry is looking into whether Musk misled investors with his tweet.
Regulators will also likely look into Musk’s motivations for the tweet: Specifically whether he was trying to force a squeeze on short sellers.
Short sellers are investors who bet that a company’s stock will fall. Typically, they borrow shares from other investors and sell them at what they see as an inflated price with the plan to repurchase and return the shares when the stock falls. A squeeze can happen when stock prices rise far above the point at which short investors sold their shares, and they feel forced to repurchase them to cut their losses – or at the instigation of the underlying owners of the shares.
Musk has been in a public and long-running battle with short sellers. He’s blamed them for spreading “negative propaganda” about the company and said that being rid of them was one of the reasons why he might want to take Tesla private.
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