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Report: DoJ Investigating Tesla, Musk's Go-Private Remarks

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Report: DoJ Investigating Tesla, Musk's Go-Private Remarks
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Tesla, Inc. (NYSE: TSLA) stock plummeted more than 4.5 percent in midday trading Tuesday following reports that the company is facing a criminal probe related to statements made by the company and CEO Elon Musk.

What Happened?

According to Bloomberg, the Justice Department is looking into statements made by Tesla and Musk as part of a fraud investigation related to Musk’s abandoned proposal to take Tesla private.

Musk tweeted that he had “funding secured” to take Tesla private at a share price of $420 back on Aug. 7. In subsequent weeks, it appeared as if Musk never had any formal deal in place for a Tesla privatization deal, and Musk later said in a blog post that he abandoned the plan after shareholders voiced their opposition.

After Musk's announcement of a potential go-private transaction, Tesla received a voluntary request for documents from the Department of Justice and cooperated with that request, the automaker said in a statement emailed to Benzinga.  

"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.”

Why It’s Important

Tesla has repeatedly missed Model 3 production targets, and Musk has been criticized for his erratic behavior. In addition to the bizarre go-private plan, Musk refused to answer analyst questions on a Tesla earnings call, smoked marijuana on Joe Rogan’s podcast and became emotional during an interview with the New York Times.

Musk is already the subject of shareholder lawsuits related to his “funding secured” tweet, including one led by Citron Research short seller Andrew Left.

What’s Next?

Multiple Tesla analysts have suggested the company consider removing Musk from his role as chairman, including longtime Tesla bull Gene Munster. 

Tesla investors will be watching closely for any further details about the criminal probe, which people familiar with the matter say is still in its early stages at this point. 

After Tuesday’s sell-off, Tesla shares are now down 25.8 percent in the past year.

Related Links:

Gene Munster: 3 Ways Elon Musk Is Hurting Tesla

Gene Munster: Telsa Still Holds Upside Potential, But Elon Musk Is Making Life Hard For Bulls

Photo courtesy of Tesla. 

Posted-In: Andrew Left Bloomberg Citron ResearchNews Short Sellers Legal Movers Trading Ideas Best of Benzinga

 

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