LOS ANGELES (CBSLA/CBS NEWS) — Tesla stock tumbled Tuesday after the U.S. Department of Justice announced it will investigate the company over a statement made by CEO Elon Musk about taking Tesla private.
Tesla confirmed it had been contacted by the DOJ in a statement to CBS MoneyWatch.
“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. 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,” a company spokesperson said.
According to reports, Musk is under scrutiny for tweeting in August that he planned to take the electric car company private. That announcement initially sent stock prices through the roof, up 11 percent in one day. But share value has since fallen.
Shortly thereafter, the company admitted that funding wasn’t lined up, and eventually Musk abandoned the idea.
In a blog post made public after several hours of tweeting, Musk laid out his rationale for wanting to go private:
As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders. Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term. Finally, as the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company.
The news comes on top of prior reports of a civil probe by the Securities and Exchange Commission.
According to the Wall Street Journal, the SEC is also looking at whether Tesla misled about production problems with the Model 3. The model — marketed as an “affordable” Tesla electric car with a $35,000 initial price tag — has been plagued by logistical problems, with Tesla delivering just 2,700 cars last year — far less than the 200,000 Musk had earlier promised.
Shares of Tesla, which trade on the Nasdaq exchange under the ticker symbol TSLA, dropped 3.5 percent Tuesday, to around $285. The stock is down nearly 12 percent this year, buffeted by reports of production delays, erratic and reports of Musk’s seemingly personal life.
“There’s a gray area between free speech and criminal speech,” attorney Alexandra Kazarian told CBS2 News. “If it can be proven that he purposely lied in order to make the investors do something, that’s fraud.[…] It’s hard to prove because, how do we know that he didn’t have that funding? How did we know that there’s nobody in the world that would have given him that money if he wanted it.”
This is just one of Musk’s recent legal troubles. He is being sued by a British diver who helped rescue the boys trapped in a Thai cave back in July. Vernon Unsworth says Musk called him a pedophile on Twitter and made other false accusations against him after the highly publicized rescue.