This could be an all time Machiavellian move just to punish the Solarcity shorts on Wall St., which include Jim Chanos and others. The after hours bump to SC is killing the shorts and that might be the point more so than the deal actually closing.
It's very unlikely they would do something like this just to punish short-sellers.
Also, Tesla is also popular among short-sellers, and it dropped in value (which was expected), so it wouldn't make any sense to 'punish' short-sellers in SCTY only to 'reward' them in TSLA.
That would be pretty interesting, but is it legal? Is it just illegal to manipulate stocks for gain (or personal gain), or is any manipulation (if provable) illegal? It seems a fuzzy rule based the SEC description[1], which is probably why it's so hard to go after people for it.
What if you know it won't be (such as a condition of the offer being incompatible with a prior contract you know about on the other side)? At what point does it cross from marketing to market manipulation? Both have an intended side effect. Just increased media exposure for a period could be a side effect.
>What if you know it won't be (such as a condition of the offer being incompatible with a prior contract you know about on the other side)
I'm pretty sure that's intent to commit fraud.
ANAL, ANA-Finance Guy.
I'm pretty sure the "intent" is the important part here if the primary purpose of a financial move is to manipulate the market that's where you start getting into trouble.
Making a non-sincere offer and publishing it in order to create media traction that would have a major impact on the market can quite possibly be illegal.
That said if the offer was intentionally non-sincere only an idiot would publish it as part of the PR, 30% premium on a stock however seems to be a pretty sincere and good offer to me tho.
It's fraud to offer someone a deal you know they aren't allowed to accept? It might be fraud to let it go through with prior knowledge, but if you clued them in that they shouldn't do so before hand, then I'm not sure how you could be found at fault for someone else's breach of contract.
It's probably only distinguished by whether you admit your intention was to never have the deal succeed, or claim that you came by the knowledge, or at least the understanding, after the initial offer.
There's an interesting calculus potentially at play: there can be a sincere intent that the offer be accepted, but the offer might have never been made were it not for the positive side-effects that mitigate the downside.
Well, in this case, the question is will some people that have shorts and have to pay higher premiums decide to drop them if the offer sits for a while and continues to affect the market, if they expect it to go through? Does getting more exposure in the media affect the companies in a lasting way beyond the timeframe of the deal?
In a perfectly rational and efficient market the answer would be no. I don't think we're in a perfectly rational and efficient market. So I guess the question is whether the market is irrational enough or inefficient enough that there's some way to game the side-effects of this usefully.
This only stings the shorts if they don't go through with it. Otherwise they're paying a premium and stinging themselves too. And if the shorts can hold on, and they don't go through with it, then the stock price will go back down.
http://www.businessinsider.com/solarcity-tesla-deal-short-in...