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2 Years Since 'Funding Secured' Firestorm, Musk And Tesla Are Flying High

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2 Years Since 'Funding Secured' Firestorm, Musk And Tesla Are Flying High

It’s been exactly two years since Tesla Inc (NASDAQ: TSLA) CEO Elon Musk posted his infamous “funding secured” tweet that created a firestorm of backlash against Musk and the company.

Two years later, a Wall Street buying frenzy in the electric vehicle space has Tesla’s stock price trading more than three times higher than the $420 buyout price that Musk could not substantiate back in 2018.

Funding Not Secured: The tweet that started it all was posted at 12:48 p.m. on Aug. 7, 2018: "Am considering taking Tesla private at $420. Funding secured."

Understandably, Tesla’s share price jumped 14% that day to an intraday high of $387 before closing at $379.

A week later, Musk clarified his mysterious funding, which he said in a blog post was coming from the Saudi Arabia sovereign wealth fund, a 5% owner of Tesla at the time. Musk said he left a meeting with Saudi representatives with “no question that a deal with the Saudi sovereign fund could be closed.”

On Aug. 15, the SEC subpoenaed Tesla for more information about Musk’s claims. On Sept. 27, the SEC filed a lawsuit against Musk accusing him of manipulating Tesla’s share price by making “false and misleading” claims in his “funding secured” tweet.

By that time, Tesla’s share price had sunk to $264, about 31.7% below its Aug. 7 peak.

SEC Battle: Musk denied wrongdoing and reached a settlement agreement with the SEC two days later. Musk and Tesla were fined $20 million each and Musk agreed to step down as Tesla chairman for at least three years. 

On Oct. 4, Musk lashed out at the SEC, referring to it as the “Shortseller Enrichment Commission” on Twitter.

Musk once again got in trouble on Twitter on Feb. 19, 2019, when he tweeted that Tesla would “make around 500,000” vehicles in 2019 before quickly correcting himself and stating Tesla would be delivering “about 400k” vehicles.

The SEC subsequently asked the judge who oversaw Musk’s settlement to hold him in contempt of court for violating the terms of the settlement, since the production estimate tweets were not approved by Tesla. Musk once again denied any wrongdoing. His lawyers claimed the tweets were irrelevant to Tesla investors, an explanation the SEC said “borders on the ridiculous.”

Musk reached a second agreement with the SEC in April 2019 in which the regulator laid out a specific set of rules clearly defining what is considered information “material to the company.” Musk is forbidden to tweet about anything falling into that category without first clearing it with Tesla’s lawyers.

However, Tesla’s general counsel Jonathan Chang left the company on Dec. 19, its third general counsel to depart within a year.

Meanwhile, Musk continues to take public shots at the SEC, including a crude tweet on July 2, 2020.

“SEC, three letter acronym, middle word is Elon’s,” Musk wrote.

All’s Well That Ends Well? For Tesla investors, the “funding secured” tweet is a distant memory now that Tesla’s stock price is near $1,500 per share.

Ironically, Tesla’s stock price is now 111% higher than it was back on May 1, 2020 when Musk tweeted, “Tesla stock price is too high imo.”

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Photo by Steve Jurvetson via Wikimedia.

 

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