Tesla CEO Elon Musk has said he wants to take Tesla private. Max Whittaker / Getty Images
- The Securities and Exchange Commission is “intensifying” its inquiry into Tesla, Bloomberg reported.
- According to the publication, the agency had already been gathering information about statements Tesla has made regarding sales and manufacturing targets.
- The SEC and Tesla declined Business Insider’s requests for comment.
- The SEC on Wednesday asked Tesla whether one of CEO Elon Musk’s tweets about the possibility of taking the company private was truthful, The Wall Street Journal reported.
The Securities and Exchange Commission is “intensifying” its inquiry into Tesla, Bloomberg reported Thursday, citing two people familiar with the matter.
The agency on Wednesday asked Tesla whether one of CEO Elon Musk’s tweets about the possibility of taking the company private was truthful, The Wall Street Journal reported.
According to The Journal, the SEC is also looking into why Musk’s first statement about the potential of taking Tesla private was made on Twitter instead of in a regulatory filing. The agency also asked the company whether it believes Musk’s tweet follows SEC rules about protecting investors, the report said.
Bloomberg reported that the agency had already been gathering information about statements Tesla has made regarding sales and manufacturing targets.
An inquiry from the SEC does not necessarily mean an investigation will follow.
The SEC and Tesla declined Business Insider’s requests for comment.
“Am considering taking Tesla private at $420. Funding secured,” Musk said on Tuesday via Twitter before issuing a formal statement on Tesla’s website.
Tesla’s share price surged after the tweet, rising by as much as 12%, to over $381, before trading closed.
No details about funding have been disclosed though. And according to Musk’s statement, no final decision has been made. That has some experts raising an eyebrow.
James Rosener, a partner at the law firm Pepper Hamilton, told Business Insider that Twitter was not the right medium for a securities disclosure since the platform’s 280-character limit prevented Musk from disclosing enough information relevant to investors — including the structure of the deal, its tax impact, and the amount of debt it would require — to ensure he’s not misleading them.
According to Rosener, Musk’s tweet likely ran afoul of the SEC’s anti-fraud rules.
“There’s definitely material omissions,” Rosener said. “Clearly, it was not what any lawyer with any experience in this kind of stuff would advise to put out.”
David Whiston, an equity strategist at Morningstar who covers the US auto industry, said he was confused by Musk’s tweets, which he said indicated Musk had both the funding and the shareholder votes necessary to take the company private.
“I’m still trying to understand why he even went public like this,” Whiston said, “because I don’t see a point in going public to say you are considering going private unless you’re trying to get, perhaps, the price higher than $420 a share, or you’re just really eager to hurt the short-sellers. Otherwise, why wouldn’t you just wait until you’re definitely doing a deal to say something?”
Tesla’s board released a statement on Wednesday morning, but it was very brief and offered few details besides that Musk met with the board last week to bring up the possibility of going private. Musk said via Twitter on Tuesday that the deal was contingent on a shareholder vote but that “investor support is confirmed.”
According to Probes Reporter, a research firm focusing on undisclosed SEC investigations, the SEC investigated Tesla from June 2016 to May 2017 regarding the Model 3 sedan. Tesla did not disclose the investigation, which did not result in an enforcement action, the firm said.
Tesla has been public since 2010, but Musk has said in the past that he would like to take Tesla private.
“I wish we could be private with Tesla,” Musk said in an interview with Rolling Stone published in November. “It actually makes us less efficient to be a public company.”
Musk has also said on multiple occasions that Tesla will become profitable by the end of this year and won’t need to raise additional funds, despite its increased cash-burn rate in recent quarters.
At the end of June, Tesla said it achieved its goal of making 5,000 Model 3s in one week. Musk previously said that the company would hit that number by the end of 2017 and that sustaining such a production rate is critical for Tesla to become profitable.
The Financial Times reported on Tuesday that Saudi Arabia’s sovereign wealth fund had acquired a $2 billion stake in the company. The fund owns between 3% and 5% of Tesla’s total stock, meaning the stake is likely worth $1.7 billion to $2.9 billion.
This story is developing. Check back for updates.
Read Bloomberg’s full story here.
Have a Tesla news tip? Contact this reporter at [email protected]
Read more about Tesla possibly going private:
- Tesla is now worth less than it was before Elon Musk’s $420 tweet
- A deal to take Tesla private probably won’t come from Wall Street or Silicon Valley
- A couple reasons why Elon Musk could actually pull off his wild plan to take Tesla private
- Elon Musk is in perilous territory after tweeting about wanting to take Tesla private, experts say
- Taking Tesla private would be the largest buyout in history — but maybe not much money would change hands
- ‘A private life is a happy life’: Here’s what Wall Street is saying about Tesla’s plan to leave the stock market
Get the latest Tesla stock price here.
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