The Securities and Exchange Commission (SEC) is ramping up its investigation into Tesla co-founder and chief executive Elon Musk after he tweeted last week that he was considering taking the electric-car maker private, and said “funding secured”, FOX Business’ Charlie Gasparino exclusively reported.
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The investigation is now "formal", according to Gasparino.
Tesla shares sank on news of the probe on Wednesday.
“They’re between a rock and a hard place on this one,” Gasparino said. “[On one hand] it looks like what Elon Musk said when he said funding was secured, particularly after his statements recently, was not accurate. They don’t have the funding actually secured. They’re talking to people, what we understand, about the process of going private.”
Tesla's board has yet to confirmed any funding details, but Musk outlined additional details on it in a blog post, noting he was all but certain to have landed the investment from the Saudi sovereign fund in July.
Still, that doesn't confirm his statement, considered "material" and likely problematic for the SEC.
The San Francisco office of the SEC has sent subpoenas to Tesla regarding its privatization plans and Musk’s statement to determine whether the billionaire inventor intentionally misled investors, Gasparino said.
Tesla, in response, has also hired two law firms, Paul, Weiss, Rifkin, Wharton & Garrison to help deal with the SEC, and Latham & Watkins to advise on privatization.
Last week, Musk shocked investors after tweeting that he could take the company private at $420 per share, the stock soared on the news before being halted by the Nasdaq.
A former SEC commissioner told FOX Business last week if Musk's funding disclosure was not accurate, which appears to be the case a week later, it would create a new round of legal issues for Musk.
Both Tesla and the SEC have declined to comment about the investigation.