The U.S. Securities and Exchange Commission has sent subpoenas to Tesla Inc regarding Chief Executive Elon Musk’s plans to take the company private and his statement that funding was “secured,” Fox Business Network reported on Wednesday, citing sources.
Subpoenas typically indicate the SEC has opened a formal investigation into a matter. Tesla and the SEC declined to comment.
The electric carmaker’s shares, which fell as much as 4 percent on the news of subpoenas, were last down 1.9 percent at $341.00 on Wednesday.
Tesla shares cut their losses after Goldman Sachs Group Inc said it was dropping equity coverage of Tesla because it is acting as a financial adviser on a matter related to the automaker. Investors viewed the news as confirming a tweet from Elon Musk on Tuesday about hiring Goldman.
Musk stunned investors and sent Tesla’s shares soaring 11 percent when he tweeted early last week that he was considering taking Tesla private at $420 per share and that he had secured funding for the potential deal.
Musk provided no details of his funding until Monday, when he said in a blog on Tesla’s website that he was in discussions with Saudi Arabia’s sovereign wealth fund and other potential backers but that financing was not yet nailed down.
Musk also tweeted on Monday he was working with Goldman Sachs and private equity firm Silver Lake as financial advisers. However, as of Tuesday, Goldman was still negotiating its terms of engagement with Musk, according to a person familiar with the matter.
The 47-year old billionaire’s tweet about secured funding may have violated U.S. securities law if he misled investors. On Monday, lawyers told Reuters Musk’s statement indicated he had good reason to believe he had funding but seemed to have overstated its status by saying it was secured.
The SEC has opened an inquiry into Musk’s tweets, according to one person with direct knowledge of the matter. Reuters was not immediately able to ascertain if this had escalated into a full-blown investigation on Wednesday.
This source said Tesla’s independent board members had hired law firm Paul, Weiss, Rifkind, Wharton & Garrison to help handle the SEC inquiry and other fiduciary duties with respect to a potential deal.
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