On August 14, Elon Musk spoke out again, confirming that the privatization funds came from the Saudi Sovereign Wealth Fund and stating that the fund had sufficient funds to complete the transaction.
But at the same time, Tesla Board of Directors announced the appointment of a special committee composed of three Independent Director,
Independent legal and financial advisors have been retained to determine next steps regarding a potential privatization proposal by Elon Musk.
CNBC reports pointed out that the Saudi sovereign wealth fund holds less than 5% of Tesla shares in the open market, and the fund has not yet commented on whether it supports Tesla's privatization.
At the same time, the SEC's investigation continues to advance. A person familiar with the matter revealed that the SEC has issued a subpoena to Tesla, and the investigation surrounding whether Elon Musk's tweet is true is being escalated.
Tesla's stock price fell 2.57% that day to 338.69 US Dollar--falling below 350 US Dollar's Strike Price.
After August 15, public opinion took a sharp turn.
A growing number of analysts are beginning to question the feasibility of privatization.
Most shareholders are opposed to privatization, and Elon Musk's plan lacks sufficient financial support.
Rating agency Moody's also issued a report saying that Elon Musk's unconventional operation of announcing the privatization plan through Twitter will have a negative impact on Tesla's credit outlook.
The stock price keeps falling.
On August 17, Tesla's stock price fell 8.93% to 305.5 US Dollar, the largest drop in two years.
Within ten days, Tesla's stock price fell from 379.57 US Dollar to as low as 305.5 US Dollar, a drop of 19%, and the market value evaporated by 12 billion US Dollar.
On the same day, the Wall Street Journal published an in-depth analysis titled "Elon Musk's Privatization Farce."
The article reads, "A Listed Company with a market value of more than 60 billion US Dollar, its future is actually tied to a tweet. This is not what the capital market should be like."
Short Sellerss have completely turned over.
According to data from S3 Partners, Short Sellers has earned 3 billion US Dollar since Elon Musk tweeted about privatization.
Tesla's stock price rose after the tweet, causing Short Sellers to lose 4 billion US Dollar. However, as the situation became clear and the SEC launched an investigation, the stock price fell back, and Short Sellers made a net profit of 3 billion US Dollar.
Zhao Chen's Put Option started making money after the stock price fell below 340 US Dollar.
Strike Price 350 US Dollar, stock price 305 US Dollar, intrinsic value per share 45 US Dollar.
16 million shares, corresponding to a value of 720 million US Dollar. After deducting the Premium cost of 160 million US Dollar, the net profit is 560 million US Dollar.
And this is just the beginning.
If the stock price continues to fall, the gains will expand.
But Zhao Chen did not close the position. He had seen the memory of Previous Life and knew that the privatization farce would continue to ferment.
When Elon Musk officially announces that it will give up privatization, the stock price will continue to fall.
But that's not what he should worry about. All he has to do is wait.
On August 24, this 17-day farce finally came to an end.
Elon Musk published an open letter on the official website of Tesla, announcing that it would give up privatization.
He said in the open letter, "The process of privatizing Tesla was very challenging, but the time and energy consumed as a result obviously exceeded expectations."
He also admitted that most of the existing shareholders of Tesla believe that it is best for the company to maintain its status as Listed Company.
CNBC's live broadcast cut to the trading floor of New York Stock Exchange.
The host's voice almost shouted:
"Elon Musk gave up! The privatization plan was officially terminated! Tesla's stock price fell sharply after the market opened!"
After the news came out, Tesla's stock price fell in after-hours trading, but the real sharp drop would have to wait until the next trading day.
After the close of the day, Tesla Company officially issued an announcement, saying that Board of Directors has evaluated the privatization proposal proposed by Elon Musk in the past few weeks, and currently Elon Musk and Board of Directors have given up the idea of privatization.
On August 27, Tesla's stock price bucked the trend and fell 1.10% against the backdrop of the three major indices US Stocks hitting new highs, closing at 319.27 US Dollar per share.
On August 28, Tesla's stock price continued to fall.
JPMorgan Chase significantly lowered the target price of Tesla to 195 US Dollar in the research report.
It said that as the outside world questions Elon Musk's ability to complete privatization and whether it can raise the required funds, Tesla's stock price will fall sharply this year.
On August 29, Tesla's stock price fell below 300 US Dollar.
From 379.57 US Dollar on August 7 to 298 US Dollar on August 29, the drop exceeded 21% in less than a month.
Zhao Chen's Put Option has an intrinsic value of 52 US Dollar. 16 million shares per share, corresponding to a value of 832 million US Dollar.
After deducting the Premium cost of 160 million US Dollar, the net profit was 672 million US Dollar.
As for his Common Stock 16.6 million shares, the holding cost is 292.8 US Dollar, the stock price is 298 US Dollar, there is still a floating profit, and he can still bear it.
The hedging between the two sides made him almost unscathed in this violent fluctuation.
But these numbers aren't what Zhao Chen cares about.
What he cares about is that the expressions on the faces of those investment bank traders must be wonderful when they sell Put Option.
They think Put Option is waste paper and free money. They think the privatization will be successful and the stock price will only rise but not fall.
They used the most sophisticated Model to calculate the probability, used the most professional words to convince the customer, and then--
Stumbled upon the simplest fact: market sentiment will always be overdone.
Zhao Chen picked up the tea cup and took a sip.
The tea had gone cold, but he didn't frown.
He remembered the afternoon when he first met Elon Musk. The two of them were in Manhattan's Private Club, chatting about Tesla, Starship, and First Principles.
At that time Elon Musk said something - "You are the first investor I have ever met who told me that Starship can fly."
Now, what Zhao Chen wants to say to Elon Musk is - I believe you will send Starship to Mars. But I can't believe everything you said on Twitter.
In early September, the stock price of Tesla failed to hold the 300 mark, and some different rumors began to spread in the market.
In the circle of Wall Street, someone is asking about Era Vanguard, the mysterious fund that holds nearly 10% of the shares of Tesla.
The question is not whether they have reduced their holdings, but which investment bank they bought their Put Option from.
Word of this spreads quickly and there are no secrets among traders.
The information that Era Vanguard holds 160,000 copies of Put Option is no longer a secret among the Options departments of several major banks.
Michael Chen of Goldman Sachs was the first to realize that something was wrong.
When the stock price fell below 350 in late August, he didn't pay much attention, thinking it was just a short-term fluctuation.
When the stock price fell below 320, 310, and 300, his face became uglier day by day.
JPMorgan Chase's James Holbrook and Morgan Stanley's Sarah Wu aren't much better.
Three investment banks jointly sold 160,000 copies of Put Option, Strike Price 350 US Dollar, and Premium 10 US Dollar.
At first they thought this was a business that was sure to make a profit, but now Put Option has changed from "waste paper" to "hot potato".