Another Tesla Inc. earnings call and another fanciful prediction from Elon Musk that likely spurred another Securities and Exchange Commission filing on Wednesday.
The CEO of Tesla Inc. TSLA,
told investors on Wednesday that he believed the electric car maker’s valuation would exceed the combined market capitalization of the world’s two most valuable companies: Apple Inc. AAPL,
and Saudi Arabian Oil Co. 2222,
“I believe we can far exceed Apple’s current market capitalization,” Musk said. “In fact, I see a potential path for Tesla to be worth more than Apple and Saudi Aramco combined.”
Based on Wednesday’s closing prices, the combined market capitalization of these two companies is approximately US$4.4 trillion. But at least he added a caveat – “That doesn’t mean it will happen or it will be easy, in fact it will be very difficult, will require a lot of work, very creative new products, expansion and always good luck .”
Full earnings coverage: Elon Musk teases massive Tesla stock buyback as CFO revises annual delivery guidance and stocks fall
This type of outrageous prediction is nothing new for Musk. He once predicted that Tesla would be worth as much as Apple, and his market capitalization is now roughly the same size as Apple was then, although his explanation of why Tesla would climb to that level was far from good.
The situation Musk finds himself in at the moment, however, is new. Like the soap opera that broke out of its deal to buy Twitter Inc. TWTR,
is coming to an end, he would need $5-8 billion to complete this deal, as our colleagues at Barron recently reported, and his only real path to that kind of money is to sell Tesla stock.
Musk wasn’t allowed to sell shares ahead of Tesla’s earnings report due to SEC rules, so what better way to try to pump Tesla shares before this blackout ends than to make wild predictions on the company’s earnings call?
From Barron’s: A Tesla stock sale is coming. We know who, why and when, but not how many.
A price target of over $4 trillion wasn’t the only telling claim Musk made during Wednesday’s call. He also told investors he expects Tesla to make the first stock buyback in its history next year, and a big buyout of $5 billion to $10 billion.
“Even in a bearish scenario next year, given that next year is very difficult, we still have the opportunity to make a $5 [billion] $10 billion buyout. This is obviously pending board review and approval,” he said. “So it is likely that we will make significant buybacks.”
It’s very odd to announce a stock buyback plan before it’s approved and formally implemented by a board of directors, although sharing the news early isn’t automatically a violation of securities laws. securities, said Stephen Diamond, an associate professor at Santa Clara University. Law School.
“Best practice would suggest waiting until you have your ducks lined up before making such an announcement, but I doubt that would create any obvious legal issues,” he said.
He added that Tesla’s board is likely seeking approval from its auditors and legal counsel for the stock buyback, which would explain why it is not yet approved.
“There is an accounting test under Delaware law that the company must meet to repurchase stock,” Diamond said in an email. “Generally, he can only redeem shares if there is a ‘surplus’ available. To assess this would require the support of their internal finance team on the board and probably also outside opinions from their auditors and legal advisers.
While early disclosure of buyout plans won’t automatically register alarm bells at the SEC office, these types of statements from Musk will specifically wake up some ears in the regulator’s offices. Musk has already faced recriminations from the agency for prior statements and has been targeted for failing to follow the settlement he agreed to in the case. Musk was also reportedly under active investigation for his behavior while trying to acquire Twitter, which Twitter appeared to confirm in a legal filing earlier this month.
More: Elon Musk’s legal battle with Twitter may be over, but his war with the SEC continues
On the call, Musk only said he was “excited about where Twitter is at,” while admitting that “I and other investors are obviously paying too much right now.”
Tesla officials did not respond to a request for comment or respond to a question about whether Musk needed to sell more Tesla stock to complete the Twitter deal.
The question for Tesla investors, however, is whether they overpriced Tesla shares ahead of another round of stock sales from Musk, who has already sold billions of shares over the past year. , which would have prompted a new investigation by the SEC. On Wednesday, however, shares fell more than 6% in after-hours trading despite the CEO’s buoyancy, which appeared to be overshadowed by a loss in revenue and a reduced outlook.
Perhaps investors are finally seeing through Musk’s earnings call that has driven Tesla stock in value in the past. But if Musk sells Tesla stock in the coming days after trying to talk about the company’s value, it won’t be investors knocking on his door, it could be the SEC yet again.
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