The U.S. Securities and Exchange Commission (SEC) has sent a subpoena to Tesla after an August 7 tweet by CEO Elon Musk saying he was considering taking Tesla private. In his post, Musk said that he had “funding secured” to privatize the electric car maker at a price of $420 a share.
On Wednesday, reports of the subpoena initially sent shares of the company to a dip of more than 4% in the morning session. They later recovered some of the losses to close the regular session at $338.69, after dropping 2.6%. The stock extended the downward trend in the early hours of regular trading Thursday, to trade at $337.28.
Sources familiar with the investigation told The New York Times that the federal regulators are seeking information from all Tesla directors. Both SEC and Tesla representatives declined to give comments to The New York Times.
Fox Business reporter Charles Gasparino broke the news before the NYT tweeting, “SCOOP: SEC ramps up investigation into Tesla privatization plans; sends subpoenas to Tesla regarding privatization plans and Musk’s statements involving “funding secured”–sources Subpoenas signal investigation has reached the “formal” stages — sources more now @FoxBusiness”
Last week, the regulator asked Tesla to clarify whether Musk was honest in his tweet. The CEO then sought to explain himself through a blog posted on the company’s official website. He said that Saudi Arabia’s sovereign wealth fund has contacted him severally over the last two years pushing to take Tesla private.
According to FactSet figures, Tesla insiders and Musk own close to 25% of the Palo Alto, California-based firm, while the Saudi Public Investment Fund holds about 5%. Individual investors own nearly 17% of the company, while the remaining 58% is owned by institutional investors.
Musk is not likely to have an easy time if his plan about taking the company private is genuine. Under U.S. law, if a public company has more than 300 shareholders, it cannot go private and end its filing or registration obligations with the SEC.
Further, a company with more than 500 individual investors that are below certain wealth threshold and incomes has to register its securities with the regulator.
Musk has come under fire in recent weeks over his Twitter behavior. The controversial billionaire has on several occasions caught some of his fellow board members off guard with his tweets. Some of them have reportedly requested him to refrain from using the social media network.
About Tesla, Inc.
Tesla designs, develops, manufactures, and sells fully electric vehicles, energy storage and generation systems. The firm also provides vehicle service centers, supercharger station, and self-driving capability. It operates through Automotive, and Energy Generation and Storage segments.
The Energy Generation and Storage segment includes the design, manufacture, installation, sale, and lease of stationary energy storage products and solar energy systems, and sale of electricity generated by its solar energy systems to customers. The Automotive segment includes the design, development, manufacture and sale of electric vehicles.
The company was founded on July 1, 2003 by Elon Reeve Musk, Martin Eberhard, Marc Tarpenning and Jeffrey B. Straubel.
