A lawsuit has been filed against Tesla Inc. TSLA CEO Elon Musk over a controversial tweet. The tweet could have also served as a starting point for investors considering the possibility of a take-private transaction or the notion that shares were undervalued at the time.
In 2018, Musk tweeted that he had secured $420 million to take Tesla private. The price represented a roughly 20% premium over the previous trading price of Tesla shares.
A trial is currently underway to determine whether Musk had in fact secured funding or was merely attempting to boost Tesla’s stock price.
Elon Musk Returns To Trial
Musk testified that the Public Investment Fund, the sovereign wealth fund of Saudi Arabia, contributed to the funding for taking Tesla private. Tuesday, January 24, 2023: Elon Musk, chief executive officer of Tesla Inc., arrives in court in San Francisco, California, United States.
He added that his tweet was not intended to imply that Tesla would be taken private, but that he believed he had the necessary funding if shareholders decided to do so. Glen Littleton, the lead plaintiff, testified last week that he lost over 75% of his investments as a result of Musk’s funding-secured tweet.
The Tesla CEO also testified that Alphabet Inc GOOGGOOGL had an interest in acquiring Tesla at the time and that Alphabet’s interest in acquiring Tesla played a role in his decision to secure funding for taking Tesla private.
Tesla did not ultimately go private and remained a publicly traded company. Here is a look at the performance of stocks since Musk’s infamous tweet.
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Tesla’s Stock Rose Amid Controversies
On August 7, 2018, after opening at $343.80, shares reached a high of $387.45 during the trading day. At the day’s peak, a $1,000 investment in Tesla could have purchased 2.58 shares of TSLA.
In 2020 and 2022, Tesla had a five-for-one stock split and a three-for-one stock split, respectively. The splits would have resulted in the 2.58 shares becoming 38.7 shares. A $1,000 investment in Tesla at the time of Musk’s tweet would be worth $6,156.40 today, based on the current price of $159.08 per share.
Since the time of the tweet, this represents a return of 515.6%. In the past four and a half years, the hypothetical investment would have produced an average annual return of 114.6%.
Despite the fact that Tesla did not go private, investors who stayed or invested at the time of the tweet have been rewarded with market-beating returns. If the take-private deal had closed at $420, the same $1,000 investment at the intraday high on August 7, 2018, would have been cashed out at $1,083.60, a gain of 8.4%.
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