Another earnings call for Tesla Inc. Elon Musk’s latest fictional prediction will likely encourage another open filing at the Securities and Exchange Commission on Wednesday.
CEO of Tesla Inc. TSLA,
He told investors Wednesday that he believes the electric-car maker’s valuation will exceed the combined market value of the world’s two most important companies: Apple Inc. AAPL,
and Saudi Arabian Oil Company 2222,
“I think we can far outpace Apple’s current market value,” Musk said. “In fact, I see a potential path for Tesla to be more valuable than Apple and Saudi Aramco combined.”
Based on Wednesday’s closing prices, the combined market capitalization of these two companies is approximately $4.4 trillion. But at least he added a caveat – “It doesn’t mean it’s going to happen or it’s going to be easy, in fact it’s going to be very difficult, and it requires a lot of work, very creative new products, expansion, and good luck always.”
Full earnings coverage: Elon Musk sparks a massive buyback of Tesla stock as CFO forecasts annual deliveries and stock drops
This kind of outrageous prediction is nothing new to Musk. He had already predicted that Tesla would be worth as much as Apple, and that its market value is now roughly the same as Apple at the time, although his explanation for why Tesla rose to this level was elusive.
However, the situation that Musk is now experiencing is new. As the TV series that broke from its deal to buy Twitter Inc. TWTR,
It’s coming to an end, and it’s believed he needs between $5 billion and $8 billion to close that deal, as colleagues at Barron’s recently reported, and his only real way to get that kind of cash is to sell Tesla stock.
Musk has been banned from selling stock before Tesla earnings report due to SEC rules, so what better way to try to pump up Tesla stock before this blackout ends making some predictions off the company’s earnings call?
From Barron’s: Tesla stock sale is coming. We know who, why and when, but not how much.
The $4 trillion price target wasn’t the only eye-opening claim Musk made on Wednesday’s call. He also told investors he expects Tesla to make its first stock purchase in the company’s history next year, and a big one when: $5 billion to $10 billion.
“Even in the downside scenario next year, since next year is going to be very difficult, we still have the ability to do $5 [billion] to $10 billion to buy back. This is clearly pending Board review and approval. “So we’ll probably do some meaningful buybacks.”
Stephen Diamond, associate professor at Santa Clara University, said it was very odd that a stock buyback plan was announced before it was approved and formalized by the board of directors, even though sharing news early isn’t an automatic violation of securities laws. School of Law.
“Best practice suggests waiting until you get your ducks in a row before making such an announcement, but I doubt it creates any obvious legal issues,” he said.
He added that Tesla’s board is likely seeking approval from its auditors and legal counsel to buy back shares, which is why it has not yet been approved.
“There is an accounting test under Delaware law that a company must meet in order to repurchase shares,” Diamond said in an email. “Generally, it can only buy back shares if there is ‘surplus’ available. To assess this will require support from the internal finance team to the Board of Directors as well as potential outside opinions from auditors and legal advisors.”
While early disclosure of buyback plans won’t automatically register alarms at the SEC’s office, these kinds of statements from Musk specifically will raise some ears in the regulator’s offices. Musk has already faced mutual accusations from the agency for his earlier statements, and has been targeted for failing to abide by the settlement he agreed to in this case. Musk is reportedly being actively investigated for his behavior as he moved to acquire Twitter, which Twitter appears to have confirmed 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 Twitter’s position,” while acknowledging that “I and other investors are clearly paying more for it now.”
Tesla officials did not respond to a request for comment or answer a question about whether Musk needs to sell more Tesla stock to complete the Twitter deal.
However, the question for Tesla investors is whether they overpaid for Tesla shares ahead of another round of stock sales from Musk, who has already offloaded billions of shares last year, prompting another SEC investigation. On Wednesday, though, shares tumbled more than 6% in after-hours trading despite the CEO’s support, which appeared to be overshadowed by revenue failures and diminished expectations.
Investors may finally see through Musk’s earnings call that boosted the value of Tesla shares in the past. But if Musk sells Tesla shares in the coming days after trying to talk about the company’s value, investors won’t knock on his door, the SEC could be again.
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