Elon Musk’s August 7 tweet has been subjected to investigation by the Justice Department. The criminal investigation is running parallel to a previously reported civil inquiry by securities regulators.
Tesla faces an inquiry as Federal prosecutors opened a fraud investigation after Musk tweeted that he was contemplating Tesla private and had “funding secured” for the deal.
Am considering taking Tesla private at $420. Funding secured.
— Elon Musk (@elonmusk) August 7, 2018
The Tesla criminal probe move comes as the U.S. Securities and Exchange Commission is also allegedly suspecting the company for potential civil violations. Tesla confirmed that last month it “received a voluntary request for documents from the DOJ and has been cooperative in responding to it.” The company claims it has “not received any call, request for testimony, or any other formal process.”
Shares of Tesla dropped 3.7% to trade at US$283.92, having hit a session low of US$275.50 during Tuesday’s session, market observers began questioning whether the proposal was as solid as Musk suggested.
The inquest for the case is in its inception. People familiar with the matter said that the civil inquiries undertaken by the SEC can take months.
Musk has been under intense pressure to prove he can deliver consistent production numbers for the Model 3 sedan, which is crucial to Tesla’s plan to become a mass-market automaker. He said on Monday the company is facing delivery bottlenecks as it ramps up production to meet its target of 6,000 cars per week.
It’s still unclear whether the criminal investigation is that extensive. The CEO’s behavior has raised concerns about his leadership and some investors and analysts are urging Tesla to take a second thought for a second strong person who would be in command.