We recently reported that Elon Musk had shocked the stock market and most of the investment world, with a tweet indicating that he was preparing to take Tesla (NASDAQ: TSLA) private with a stock buyback that had already been funded. In the following days, controversy began to erupt around the news, with one disgruntled investor even taking Tesla to court, alleging that Elon Musk had manipulated the market with the intention to cause losses for short sellers.
Now news has emerged that the Securities and Exchange Commission (SEC) has served Tesla with a subpoena, which is the latest development in what could become a full investigation into Musk’s announcement.
What Did Elon Musk Say in His Tweets Last Week?
Musk’s tweet, sent on August 7th, read “Am considering taking Tesla private at $420. Funding secured.”
In a follow up, Musk said that “My hope is *all* current investors remain with Tesla even if we’re private. Would create special purpose fund enabling anyone to stay with Tesla. Already do this with Fidelity’s SpaceX investment.”
In yet another tweet, Musk stated “Shareholders could either sell at 420 or hold shares & go private”.
The tweets sent the market into a frenzy with the NASDAQ taking more than an hour to suspend trading on the stock. Investor confidence grew even as short sellers collectively lost over $800 million within a day of the tweet, when stock value increased. Now almost ten days later, it seems that Tesla is at risk of a full investigation from the SEC.
SEC Requests Information from Tesla Executives
The subpoena issued this week seeks to obtain information from every director at Tesla. The exact nature of the information has not been reported on, but it is generally agreed by journalists and analysts that the SEC wants to determine whether funding has in fact been secured for a buyback, and whether Elon Musk’s tweets were legitimate.
The subpoena could lead to a deeper investigation with potential legal complications for the company and Elon Musk. In a Tesla blog earlier this week, Musk said that he made the tweets based on discussions that were underway with the Saudi Sovereign Wealth Fund. Musk admitted that a deal had not been signed.
Despite the controversy and confusion surrounding Musk’s announcement, stock is still performing well. Value is up 19.03% over three months, and 5.76% for the last month. However, for investors to remain confident, Tesla will need to clarify its position, especially as a full investigation from the SEC seems increasingly likely.
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