Opinion: Elon Musk is pumping Tesla stock with a ridiculous $4 trillion target. Will there be a mess?

Another earnings call from Tesla Inc. and another fanciful prediction from Elon Musk that likely encouraged another pending filing with the Securities and Exchange Commission on Wednesday.

The chief executive of Tesla Inc. TSLA, +0.84% ​​told investors on Wednesday it believes the electric car maker’s valuation will surpass the combined market capitalization of the world’s two most valuable companies: Apple Inc. AAPL, +0.08% and Saudi Arabian Oil Co. 2222, +0.42%.

“I believe we can far exceed Apple’s current market cap,” Musk said. “In fact, I see a potential path for Tesla to become worth more than Apple and Saudi Aramco combined.”

Based on Wednesday’s closing prices, the combined market cap of those two companies is about $4.4 trillion US dollars. But at least he added a caveat: “That doesn’t mean it will happen or it will be easy, in fact it will be very difficult, take a lot of work, very creative new products, expansion and always good luck.”

Full Earnings Coverage: Elon Musk Teases Mass Buying of Tesla Shares as CFO Adjusts Forecast for Annual Deliveries and Inventory Drops

These kinds of outrageous predictions are not new to Musk. He was already predicting that Tesla would be worth as much as Apple, and its market cap is now about the same as Apple’s then, though his explanation of why Tesla would rise to that level was far off.

However, Musk’s current situation is new. Now that the soap opera that has erupted from its deal to buy Twitter Inc. TWTR, +0.10% draws to a close, he is believed to need somewhere between $5 billion and $8 billion to close that deal, as our colleagues at Barron’s recently reported, and his only real way to to make that kind of money is to sell Tesla stock.

Musk couldn’t sell stock before Tesla’s earnings report because of SEC rules, so what better way to try and pump up Tesla’s stock before that blackout ended than to make some distant predictions about the company’s earnings call?

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

A price target of more than $4 trillion wasn’t the only eye-opening claim Musk made in Wednesday’s call. He also told investors he expected Tesla to make the first share buyback in its company history next year, and a big one: $5 billion to $10 billion.

“Even in a downward scenario next year, as next year is very difficult, we still have the opportunity to do a $5… [billion] buyback of $10 billion. This is obviously pending review and board approval,” he said. “So it’s likely we’ll make a meaningful buyback.”

It’s very strange to announce a stock buyback plan before it’s approved and officially put in place by a board of directors, even though sharing the news early isn’t automatically a violation of securities laws, said Stephen Diamond, an associate professor at the Santa Clara University School of Law.

“Best practices might be to wait until you have your ducks lined up before making such an announcement, but I doubt this will create any obvious legal issues,” he said.

He added that Tesla’s board is likely to seek approval from its accountants and legal counsel for the share buyback, which would explain why it has not yet been approved.

“There is an accounting test under Delaware law that the company must meet in order to repurchase stock,” Diamond said in an email. “In general, it can only buy back shares if there is a ‘surplus’ available. Assessing that would require support from their internal finance team to the board of directors and likely external opinions from their auditors and legal counsel.

While early disclosure of buyback plans wouldn’t automatically register alarms at the SEC’s office, these kinds of statements by Musk will specifically perk up some ears at the regulator’s offices. Musk has already faced accusations from the agency for previous statements and has been the target of non-compliance with the settlement he agreed to in that case. Musk is also reportedly being actively investigated for his behavior when he switched to Twitter, which Twitter appeared to confirm 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

During the call, Musk would only say that he is “excited about the Twitter situation,” while admitting that “myself and the other investors are clearly paying too much for it right now.”

Tesla officials have not responded to a request for comment or to a question about whether Musk needs to sell more Tesla stock to complete the Twitter deal.

The question for Tesla investors, though, is whether they’ve overpaid for Tesla stock ahead of another round of stock sales from Musk, which has already unloaded billions in shares over the past year, reportedly resulting in yet another SEC investigation. On Wednesday, however, shares fell more than 6% in after-hours trading, despite the chief executive’s boosterism, which appeared to be overshadowed by lost sales and cropped forecasts.

Perhaps investors will finally see through Musk’s earnings call that has pushed the value of Tesla’s stocks up in the past. But if Musk sells Tesla stock in the coming days after trying to increase the company’s value, it won’t be the investors who knock on his door, but perhaps the SEC again.

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