The Wall Street Journal: Did Nasdaq drop the ball after Elon Musk’s going-private tweet?

There’s a nagging question on Wall Street after Tesla Inc. Chief Executive Elon Musk’s buyout tweet last week: Why did Nasdaq let trading in Tesla shares continue for more than an hour afterward?

Musk tweeted at 12:48 p.m. ET on Tuesday that he had “financing secured” for a buyout of TSLA, +0.86%  t $420 a share, a 16% premium to the share price at the time. The remark set off a frenzy of trading in Tesla shares, even as investors were struggling to discern whether the tweet was legitimate and what precisely it meant. It wasn’t until 2:08 p.m. that Nasdaq Inc. NDAQ, -0.75%   acted to halt trading in Tesla shares. In that 80-minute interim, investors who bought and sold the shares were potentially disadvantaged by the lack of clear information about the company, some investors said.

Typically, exchanges halt trading in a company’s shares when it tells them it is about to release “material news,” or information that could sway investors’ trading decisions. An exchange typically keeps trading halted until a disclosure provides some clarity. Other investors wondered why the exchange kept the halt in place for more than an hour and a half, and then why it chose to resume trading at 2:45 p.m.

It’s the latest episode to raise questions about the governance of U.S. markets. “We don’t know what efforts Nasdaq engaged in to get a more discrete picture of what was happening,” said Harvey Pitt, former chairman of the U.S. Securities and Exchange Commission and chief executive of consulting firm Kalorama Partners LLC. “All of this is unprecedented, it’s highly problematic and it’s not consistent with careful and thoughtful approaches to a difficult subject.”

An expanded version of this report appears on WSJ.com.

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