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Opinion: Elon Musk is pumping Tesla stock with a ridiculous $4 trillion target. Is a dump coming next?

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Another Tesla Inc. earnings call and another fictitious Elon Musk prediction that spurred another open filing at the Securities and Exchange Commission on Wednesday.

Tesla Inc. CEO of TSLA,
He told investors on Wednesday he believes the electric car maker’s value will exceed the combined market cap of the world’s two most valuable companies: Apple Inc. AAPL,
and Saudi Arabian Oil Company 2222,

“I think we can far exceed Apple’s current market cap,” Musk said. “I actually see a potential way for Tesla to be worth more than Apple and Saudi Aramco combined.”

According to Wednesday’s closing prices, the combined market value of these two companies is approximately US$4.4 trillion. But he added at least one caveat – “That doesn’t mean it will happen or it will be easy, it will actually be very difficult, it will require hard work, very creative new products, expansion and always good luck.”

Full earnings coverage: Elon Musk teases Tesla stock buyback as CFO cuts forecast for annual deliveries and stock drops

This kind of outrageous prediction is not new to Musk. He had already predicted that Tesla would be as valuable as Apple, and now its market cap is roughly the same size as Apple’s back then, but Tesla’s explanation of why it rose to that level was far from over.

However, the situation that Musk is currently in is new. Twitter Inc. As the soap opera coming out of the deal to buy TWTR,
As our colleagues at Barron’s recently reported, it’s believed to need somewhere between $5 billion and $8 billion to close this deal, and the only real way to get that kind of cash is to sell Tesla shares.

Musk was barred from selling shares ahead of Tesla’s earnings report due to SEC rules, so what better way to get Tesla’s stock pumped before this blackout ends and what better way to do it than to make distant estimates on the company’s earnings call?

From Barron’s: Tesla stock sale is coming. We know who, why and when, but not how much.

A $4 trillion price target wasn’t the only standout claim Musk made in Wednesday’s call. He also told investors that he expects Tesla to complete its first stock buyback in its corporate history next year, with a major stock buyback between $5 billion and $10 billion.

“Even in a negative scenario next year, we still have a chance to earn $5, given that next year is very difficult. [billion] For a $10 billion buyback. This is clearly awaiting board review and approval.” “So we’re likely to make a meaningful buyback.”

Stephen Diamond, an associate professor at Santa Clara University, said it was very strange that a share repurchase plan was announced before it was approved and formally implemented by a board of directors, but that early sharing of news is not automatically a violation of securities laws. Law School.

“Best practices recommend waiting until you’ve had your ducks back-to-back before making such an announcement, but I doubt this will cause any obvious legal issues,” he said.

He added that the Tesla board is likely awaiting approval from its supervisors and legal counsel for the share buyback, and therefore has not yet been approved.

“Under Delaware law, the company has an accounting test that it must meet in order to buy back shares,” Diamond said in an email. “Usually, he can repurchase shares only if there is an existing ‘surplus’. Evaluating this requires support from the internal finance teams to the board, and possibly outside input from their auditors and legal counsel.”

While early announcements of buyback plans won’t automatically record alarms in the SEC office, such statements from Musk will stir some ears, especially in the regulator’s offices. Musk has already faced charges by the agency for previous statements and has been targeted in this case for failing to comply with the deal he accepted. Musk is also reportedly being actively investigated for his behavior as he moved to buy Twitter, which Twitter appears to have approved in a legal filing earlier this month.

More: Elon Musk’s legal battle with Twitter may be over, but his battle with the SEC continues

In the interview, Musk only said he was “excited about the Twitter situation,” while admitting that “me and other investors are clearly overpaying for it right now.”

Tesla officials did not respond to a request for comment or a question about whether Musk should sell more Tesla shares to complete the Twitter deal.

The question for Tesla investors, though, is whether they overpaid for Tesla stock before another round of stock sales from Musk, which dumped billions of shares last year and reportedly resulted in another SEC investigation. But on Wednesday, shares fell more than 6% in after-hours trading, despite the CEO’s support, which appears to be overshadowed by a lack of revenue and a cropped forecast.

Perhaps investors are finally seeing Musk’s earnings call inflation that has boosted the value of Tesla’s stock in the past. But if Musk sells Tesla shares in the coming days after trying to talk about the company’s value, it might not be the investors knocking on his door, it might be the SEC again.