The Securities and Exchange Commission has asked Tesla about CEO Elon Musk’s tweets Monday that announced his plans to take the company private, the Wall Street Journal reported.
Am considering taking Tesla private at $420. Funding secured.
— Elon Musk (@elonmusk) August 7, 2018
Investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote. https://t.co/bIH4Td5fED
— Elon Musk (@elonmusk) August 7, 2018
Musk is no stranger to unorthodox moves, but this one may have landed him in regulatory trouble. While companies and executives routinely make announcements on Twitter, Musk’s statements that he has “funding secured” to take the company private at $420 a share may violate securities laws. The tweet caused Tesla shares to be halted during Tuesday trading.
According to the Journal, the SEC inquired about whether Musk’s statements on Twitter are factual, as well as why he made the disclosure there instead of in a formal filing with the SEC. Regulators also asked whether the company believes the tweets complied with investor-protection laws.
An SEC spokesman declined to comment on whether the agency was investigating Tesla.
It’s not clear where Tesla could have found the funding to go private, which has left some skeptics wondering whether Musk was bluffing. The SEC can file charges for fraud when it believes a company or its officers have made false statements.
Before Musk’s tweets, Tesla shares were trading at $342.50 a share. At that level, the $420 a share figure would represent a premium of more than 20%. Tesla’s shares stood at around $370 a share in midday trading Wednesday.
Part of Musk’s intention may have been to catch short sellers in a short squeeze. Hedge funds such as Jim Chanos’ Kynikos Associates have been building short positions in Tesla’s stock anticipating future declines. In a letter to employees, Musk called Tesla “the most shorted stock in the history of the stock market.”
Also on Wednesday, six members of Tesla’s board issued a statement that acknowledged discussions have taken place on the board about taking the company private. The statement did not come from Tesla’s full board of directors, but only some of them, including Brad Buss and James Murdoch.
