Tesla acquisition sends penny stock soaring, but buyer beware

Tesla acquisition sends penny stock soaring, but buyer bewareChris Bruce

Tesla made its first acquisition of another business on May 7 when it bought Michigan-based tool and die company Riviera Tool LLC for an undisclosed sum. Some stock speculators might have gotten the worst part of the deal, however, when they bought shares in a basically worthless company with the very similar name Riviera Tool Co.

The excitement in the stock market started shortly after Tesla's May 7 announcement. Riviera Tool's share price jumped from less than a penny to 22 cents by the end of the day, according to The Detroit Free Press, and peaked during that time at 60 cents. However, investors were buying up the wrong company, and the Financial Industry Regulatory Authority had to step in to stop things.

Much like the distinction between Old GM and New GM, there are actually two companies named Riviera Tool. According to The Detroit Free Press, the original was purchased in 2007 and delisted from the stock exchange. It was then transformed into Riviera Tool LLC, which Tesla bought. However, some of the shares of the previous iteration still existed to be traded off of the stock exchange, and this confused investors.

The Financial Industry Regulatory Authority now has the duty of sorting this whole mess out, according to The Detroit Free Press. Meanwhile, Tesla reportedly plans to rename its new acquisition Tesla Tool & Die.

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