Question

On August 7th, 2018, Elon Musk claimed on Twitter that he had secured funding to take Tesla private. On that day, Tesla stock price jumped up from $342 to $380 per share. Why did the financial market react positively to that news? What happened to the short sellers of Tesla stocks during that time? Recall that Musk is the founder of Tesla and was involved with the corporation’s day-to-day operations.

Answer 1

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If Elon Musk has tweeted that he has received enough funding to take Tesla private then it is very positive news because Tesla is a very big company and it will require a huge amount of capital to take it private. It is very difficult to raise money to make such a huge public limited company into a private company.

If someone is ready to fund Tesla that much amount of money then it means that Tesla is a very strong company fundamentally, that's why the market has reacted very positively.

Short sellers of the share bet on companies share falling if the company share price increases then the short seller will incur losses.