Tesla (NASDAQ:TSLA) Facing Criminal Probe Over CEO Musk’s Statements

Tesla (NASDAQ:TSLA) Facing Criminal Probe Over CEO Musk’s Statements

Tesla (NASDAQ:TSLA) Facing Criminal Probe Over CEO Musk’s Statements


Tesla (NASDAQ:TSLA) is under investigation by the Justice Department over public statements made by the company and Chief Executive Officer Elon Musk. The criminal probe is running alongside a previously reported civil inquiry by the SEC.

Federal prosecutors opened a fraud investigation after Mr. Musk Tweeted last month that he was contemplating taking Tesla private and had “funding secured” for the ‘420’ deal, said people, who were granted anonymity to discuss a confidential criminal probe. The Tweet initially drove the company’s shares higher.

Tesla confirmed it has been contacted by the Justice Department.

“Last month, following Elon’s announcement that he was considering taking the company private, Tesla received a voluntary request for documents from the DOJ and has been cooperative in responding to it,” the company said in a statement released Tuesday following a report of the investigation. “We have not received a subpoena, a request for testimony, or any other formal process. We respect the DOJ’s desire to get information about this and believe that the matter should be quickly resolved as they review the information they have received.”

The investigation by the US Attorney’s office in the Northern District of California follows a subpoena issued by the Securities and Exchange Commission (SEC) seeking information from the EV maker about Mr. Musk’s plans to go private, which he has since abandoned.

The criminal inquiry is in its early stages.

Abraham Simmons, a spokesman for the U.S. attorney’s office in San Francisco, declined to comment.

SEC enforcement attorneys in the San Francisco office were already investigating Tesla before Mr. Musk sent his Tweet on taking the company private. That probe is focused on whether Tesla had issued misleading pronouncements on manufacturing goals and sales targets, according to the two people familiar with the matter.

Prosecutors in securities-fraud investigations could seek evidence on matters including whether company leaders intentionally lied to investors about the health of the business.

Mr. Musk exposed himself to legal risk by Tweeting on 7 August that he had the funding for the ‘420’ buyout even though that may not have been the case. Shortly after, Mr. Musk said the basis for his statement was conversations with Saudi Arabia’s Public Investment Fund (PIF) which first expressed interest in helping take the company private in early Y 2017.

Tesla’s board then said that it had not received a formal proposal from Mr. Musk, who is also the company’s Chairman, nor had it concluded whether going private would be advisable or feasible. Less than 3 weeks after his initial tweets, Mr. Musk abandoned the ‘420’ effort.

Now that Mr. Musk’s tweeting has attracted the Justice Department’s attention, investigators there could extend their review to other public statements made by him about the company’s health.

Savvy analysts have said that now Tesla is a speculation and not investable.

Symbol Last Trade Date Change Open High Low Volume
NASDAQ:TSLA 284.33 18 September 2018 -10.51 296.69 302.64 275.5 15,011,569
HeffX-LTN Analysis for TSLA: Overall Short Intermediate Long
Very Bearish (-0.51) Bearish (-0.44) Very Bearish (-0.50) Very Bearish (-0.58)

Stay tuned…

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