DUBLIN – It was bound to happen, I suppose – Tesla has confirmed that the US Justice Department (DOJ) has opened an investigation into Tesla after Musk’s infamous and controversial “going private” tweets. It seems that Musk’s shoot-from-the-hip Twitter behaviour is coming around to bite him in the proverbial. On Monday, we learned that he is being sued for defamation by the British diver he accused of being a child molester on Twitter and on Tuesday, we learned of the DOJ investigation. It’s all adding up to unnecessary stress and distraction for the Tesla CEO and board at a time when the company needs to focus on building its production line and getting profitable. It is also, it bears repeating, all self-inflicted. – Felicity Duncan
DOJ Opened Probe of Tesla After Musk’s Going-Private Tweet
By Tim Higgins
(The Wall Street Journal) Tesla Inc.on Tuesday said the Justice Department has opened an investigation into the company following Chief Executive Elon Musk’s surprise tweet in August that he had secured funding to possibly take the electric-car maker private.
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The company said that last month it received a “voluntary request for documents” from the Justice Department, generally the first step in a federal investigation of this kind. Tesla said it hasn’t received a subpoena, a request for testimony or any other formal request.
Tesla said it is cooperating with the probe. “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,” the company said in a statement.
A Justice Department spokeswoman declined to comment. Bloomberg News earlier reported the Justice Department had opened a criminal investigation against Tesla.
Shares of Tesla were down 3.2% in midday trading.
On Aug. 7, Mr. Musk surprised investors when he tweeted that he was considering taking Tesla private at $420 a share, about 20% above the stock’s trading price earlier that day. In his tweet, Mr. Musk said the buyout had “funding secured,” without providing any details.
Days later it was revealed that Mr. Musk was still lining up investors and funding for a proposed deal.
Mr. Musk’s announcement also attracted scrutiny from the Securities and Exchange Commission, which is investigating Mr. Musk’s funding claim and subpoenaed Tesla seeking information from each of Tesla’s directors. Some investors have sued Mr. Musk and the company, saying the CEO misled them and they lost money as a result.
The go-private drama was one of several episodes in recent weeks that have caused some investors and analysts to question Mr. Musk’s fitness as CEO.
In July, he suggested on Twitter that a British cave explorer involved in rescuing a boys’ soccer team in Thailand was a pedophile, a claim he later apologized for and then reiterated. The man filed a defamation lawsuit on Monday against Mr. Musk. Tesla declined to comment, and Mr. Musk couldn’t be reached.
Earlier this month, Tesla shares tumbled after Mr. Musk appeared to smoke marijuana during a late night interview broadcast live on YouTube.
Meanwhile, Tesla has struggled for the past year to speed up Model 3 production, placing Mr. Musk under intense scrutiny and raising questions about the company’s finances. The company is racing to finish the quarter with the goal of turning a profit, a milestone that would help Mr. Musk prove that his plans to become cash-flow positive and avoid raising new capital was unnecessary.
“We continue to believe fundamentals are strong headed into Q3 deliveries, but we acknowledge the noise around the stock makes it challenging to invest on fundamentals, currently,” Ben Kallo, an analyst for Baird Equity Research, said Tuesday in a note.
Tesla’s stock jumped 11% on Aug. 7 following Mr. Musk’s tweets, which were sent during market hours. In the following days, Mr. Musk and Tesla’s board raced to assemble teams of financial advisers and lawyers to help facilitate complex negotiations.
On Aug. 23, Mr. Musk told the board he had decided not to follow through with a proposal. The next day, he ended the going-private talk by tweeting that “I believe the better path is for Tesla to remain public.” Tesla directors released a statement at that time saying “we fully support Elon as he continues to lead the company moving forward.”
Since Aug. 7, Tesla’s stock has fallen roughly 25% as prospects for a deal rose and fell. The shares are down roughly 8% this year after rising about 46% in 2017
Write to Tim Higgins at [email protected]
