SEC reportedly 'intensifying' examination of Tesla after Elon Musk tweets about taking the company private
The Securities and Exchange Commission is "intensifying" its inquiry into Tesla, Bloomberg reports.
According to the publication, the agency was gathering information about statements Tesla has made regarding sales and manufacturing targets before its most recent inquiry.
The SEC and Tesla declined Business Insider's requests for comment.
The SEC on Wednesday asked Tesla about whether one of CEO Elon Musk's tweets regarding 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 reports.
The agency on Wednesday asked Tesla about whether one of CEO Elon Musk's tweets regarding the possibility of taking the company private was truthful, The Wall Street Journal reported, citing people familiar with the matter.
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 Journal reported.
Bloomberg reports that the agency was gathering information about statements Tesla has made regarding sales and manufacturing targets before its most recent inquiry.
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."
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 3 sedans 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.
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