-- The U.S. Securities and Exchange Commission is intensifying
its scrutiny of Tesla Inc.’s public statements in the wake of
Elon Musk’s provocative tweet Tuesday about taking the
electric-car company private, according to two people familiar
with the matter.
enforcement attorneys in the San Francisco office were already
gathering general information about Tesla’s public
pronouncements on manufacturing goals and sales targets,
according to the people who asked not to be named because the
review is private.
attorneys from that office are also examining whether Musk’s
tweet about having funding secured to buy out the company was
meant to be factual, according to one of the people.
SEC inquiry is preliminary and won’t necessarily lead to
anything more formal. Tesla, which hasn’t been accused of
wrongdoing, declined to comment. Judith Burns, an SEC
spokeswoman, also declined to comment.
stock fell 4.8 percent to $352.45 in Thursday trading amid
mounting doubts about Musk’s ability to buy out shareholders
at $420, as he’d suggested in his Tuesday tweet. Declines over
the past two days have erased the jump in the share price
following his statement that he’d secured funding for taking
the company private.
has offered no evidence to back up the assertion, and there
have been no public announcements that anyone is backing the
don’t really understand the idea of what was suggested in the
potential for them to go private,” Dick Weil, CEO of Janus
Henderson Group, said in an interview with Bloomberg
Television. “That’s obviously an incredibly large valuation to
somehow take into the private market.”
SEC scrutiny adds to pressure on Musk, who has
a history of setting sales targets
that bulls consider to be aggressive and bears contend are
unrealistic. The question for regulators is whether any of his
public statements or the company’s run afoul of federal
securities laws. Generally, the SEC considers statements by
executives to be material information that have to be true.
has been swirling around Tesla and Musk’s disclosures amid the
yearlong struggle the company had ramping up production of the
Model 3 sedan, the first vehicle that the company has
attempted to mass manufacture.
analyst asked during an earnings call earlier this month
whether Tesla had received a notice from a regulator that
would prevent the company from raising capital. Musk, who’s
months that the company wouldn’t need
to seek more funding this year, replied: “I’m not sure what
you’re talking about, but there’s no such notice from a
SEC first ruled on the use of social media for disclosing
material information after Netflix Inc. CEO Reed Hastings
wrote in a July 2012 Facebook post that views on his company’s
video-streaming service had “exceeded 1 billion hours for the
first time.” The regulator later determined that Hastings
wouldn’t face enforcement action and declared most social
media “perfectly suitable” for communicating company
information as long as investors are alerted and access isn’t
SEC routinely makes inquiries about companies’ activities. In
cases where wrongdoing is suspected, an initial review might
lead to a formal investigation that could result in companies
or individuals being subjected to enforcement action.
initial post on a possible buyout probably wouldn’t be enough
to put him in legal jeopardy unless it proved to be false or
inaccurate, according to securities lawyers.
hasn’t disclosed any sources of financing for the deal and no
one has stepped forward publicly to say they’re backing a
buyout. On Wednesday, less than 24 hours after Musk’s initial
tweets, company board members said they started discussing the
idea with him last week.