DoJ Requests Information From Tesla Connected To “Funding Secured” Tweet

Elon Musk

SEP 18 2018 BY DOMENICK YONEY 52

Taking Tesla private fallout continues

Tesla CEO Elon Musk is facing a criminal investigation by the Department of Justice (DOJ) surrounding that now infamous tweet (embedded below) about taking the automaker private at $420 per share and having “funding secured” for the move. According to sources speaking to Bloomberg, the fraud investigation began last month.

The central issue being examined is whether there was fraudulent intent behind the tweet which sent the stock price sharply upward. It is thought the investigation could last months, and it’s unclear a prosecution will be initiated even if the entrepreneur is found to have crossed a line. In the case of an eventual successful prosecution, it’s thought that fines would be the most likely punishment. The automaker has since abandoned the effort and will remain a publicly-traded company.

For its part, Tesla has issued the following statement,

“Last month, following Elon’s announcement that he was considering taking the company private, Tesla received a voluntary request for documents from the DOJ and has been cooperative in responding to it. We have not received a subpoena, a request for testimony, or any other formal process. 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 Tesla share price, which has been under siege since it became clear it would not go private. reacted strongly to the news, sinking back down below $300. At the time of this writing it is down −$10.84 (3.68%) at $283.75.

Check out the clip below from Bloomberg featuring Tom Schoenberg discussing and adding context to the situation.

Source: Bloomberg

Categories: Tesla

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52 Comments on "DoJ Requests Information From Tesla Connected To “Funding Secured” Tweet"

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Sometimes is better to just shut up….
It will be almost impossible for them to prove intent on this one…

Not really, he has the damning tweet about “crushing shorts” several weeks before. https://www.cnbc.com/2018/06/18/elon-musk-goes-after-individual-shorts-on-twitter-with-3-week-warning.html

That only proves — if it’s even related at all — that he was planning the take-private thing for a while. In no way does it prove that he sent the take-private tweet with the intention of manipulating the stock price.

The tweets just show how serious Musk was about going private, because ONLY actually going private would guarantee permanently crushing the shorts, and completely eliminating them from going after Tesla.

Agree. Having listened to at least a dozen earnings call brow beat Elon Musk, no surprise he threw out “boring bonehead” when asked to itemize capex reductions. He may not be the guy to be on these calls, but as long as he is, he will focus on the long-term. Private companies don’t have to be dragged into myopic analyst safaris, and the short-term.

…But they do need capital.

Yes, but what reason is there to believe shorts have any effect whatsoever on Tesla? In principle it’s like saying that if I bet your health will decline against some other person who bets it will improve, then your health will deteriorate. There’s no logical connection whatsoever. Whenever somebody shorts a stock they are selling shares they don’t (yet) possess, but there’s another party who is buying it and taking a long position. The person buying the shares pays the person selling them, not the company that issued them, and the transaction has no bearing at all on the actual financial results of the company. Of course, if you had a contract that said you would be paid billions if the markets BELIEF in your health reached a certain level, you might have a beef with those betting your health would decline. They do influence the market’s estimate of the facts, even though they don’t affect the reality of the matter. Not only is the mechanism by which shorting supposedly hurts a company unexplained. What’s more, there’s empirical studies that give us good reason to believe it has no effect at all. In Tesla’s case, it seems the only reason… Read more »

It’s one thing to take a negative position against a company. It’s another when you actively start trying to manufacture an outcome- like Jim Chanos. Using your pulpit to spread disinformation and only focus on negatives (no balance) on a stock is the issue that Elon has with shorts. So there is a logical connection. Stock price affects ability to secure funding for projects, expansion, etc. When the stock price is driven down the process of operations become more difficult for the company.

I find it ironic that Elon Musk is in the crosshairs by the SEC, yet “news” outlets like Yahoo, Seeking Alpha, and Jim Chanos have a blank check to be as mis-informative as they see fit.

Musk’s lawyers are working to de-link the “short burn of the century” tweets in May/June from the go private attempt. They need to de-link because a connection can turn this from civil SEC prosecution to a criminal DOJ prosecution. The DOJ is looking through documents for evidence of such a connection. If they don’t find one they’ll sit back and let the SEC take the lead.

If they ever wanted to crush the EV revolution, Elon just handed them the opportunity, because if Tesla falls then every manufacturer will find an excuse to pull their EVs from the market.

No way. EVs don’t exist because of Tesla (the LEAF beat the Model S to market), they exist because of the regulatory climate: California, Europe, China. The technology is also naturally maturing, which is, again, due almost exclusively to government policy.

Let the record show that for the first time in history i gave him an up vote!!!

Sometimes it’s better to just shut up on this big mistake you just did.

lol…true!

(⌐■_■) Trollnonymous

I saw nuttin…..

@Seven Electrics said: “EVs don’t exist because of Tesla (the LEAF beat the Model S to market), they exist because of the regulatory climate…”
————

What is also True is that Tesla has caused the entire automotive industry to accelerate the rate of transition towards EV… which happens to be Tesla’s stated mission statement.

Nearly every traditional car maker today (several in public admitting it) is using Tesla as a baseline reference point for their own EV program.

That’s nothing new though…

Even Bob Lutz admitted the Chevy Volt was originally inspired by the Tesla Roadster.

This is a persistent misconception.

It’s true that Lutz originally wanted to make a car to compete with the Roadster – something like an EV Corvette. He was convinced by his subordinate that the Prius was the more important threat, which is why the Volt is a compact economy sedan instead of a high-powered supercar.

I disagree, There would be no further improvement. The legacy makers would keep the cars range at 150 miles max. There would be no supercharging stations. The EV’s would still look like odd weeble wobble type cars for the greenies. It’s only because of Tesla they have been forced to consider spending money on battery contracts and that is mainly because of the model 3

Oh, I think that’s an overstatement. Certainly it’s true that Tesla is pushing the EV revolution forward faster than it would have progressed otherwise, by perhaps 5-7 years. But I think by now we would have seen something like the Nissan Leaf and the Chevy Volt even if Tesla Motors had remained merely an idea floating around in Martin Eberhard’s head.

EVs are an idea whose time has come, and some startup was going to rise up and grab for the brass ring. Tesla isn’t the only EV startup of its decade; there was also CODA and Th!nk and a few others, not to mention more recent startups like Rivian. Tesla was merely the one that succeeded where most or all others have — thus far — failed.

Regulation matters, but without Tesla the incumbents would simply lobby regulators into thinking a few underpowered weirdmobiles (e.g. EV-1) is the best the technology can do.

Regulators need Tesla to show what’s possible and what the public will buy so they can push back against incumbent lobbying.

You shouldn’t underestimate the importance of the regulatory environment.

The 2000 presidential election played a big part in EVs being killed off… just as the 2008 election did the opposite.

EVs would still be sleepy backwater for tech geeks and environmentalists if not for Tesla. They literally have more than half of the US plug-in market. No one is pushing EVs as well as Teslas and the others are only doing it because of what Tesla did.

They don’t “literally” have more than half of the EV market, unless you ignore all EVs sold prior to 2017.

The market is cars sold in the current period. All cars on the road is called the fleet.

So anytime someone is talking about a “market,” you interpret that as being… the current year? Quarter? Month?

Under this definition, it would be quite interesting to see what share of “the smartphone market” Apple or Samsung have the month that a new phone is released.

Tesla is the only vehicle out there that is competitive without subsidies. Tesla deserves most of the credit for the auto industry being kicked into a higher gear for EV adoption. And I own a Leaf so certainly no Tesla fanboy.

“EVs don’t exist because of Tesla (the LEAF beat the Model S to market), they exist because of the regulatory climate… The technology is also naturally maturing, which is, again, due almost exclusively to government policy.”

Well, a quarter of that statement is actually true… which is well above the batting average for this Usual $uspect.

The technology is maturing because of advancements in battery chemistry over the past 35-40 years, as well as the invention of the integrated motor controller (including inverter) by Alan Cocconi circa 1990. The latter allowed use of efficient AC motors in EVs, rather than the much less efficient DC motors used in older EVs.

However, “Seven Electrics”, among the various errors in your comment is your claim that Nissan’s move towards EVs preceded Tesla’s production. Actually, it was news of Tesla putting the 2008 Roadster into production which inspired GM to put the Volt into production, and news of that plan reportedly inspired Nissan to do the same with the Leaf.

It’s funny that everyone else in the US is held to a higher standard than the POTUS.

My thoughts exactly when I saw the title to the article.

It’s hard to investigate your boss.

But, oh simple to investigate his hired guns, and even easier to convict them of crimes.
Because they are all guilty of course. Dad! It’s all connected:
https://www.youtube.com/watch?v=hVHqTzyZ-oM

as well they should be, since the bar is set so low, it would hard not to step over it.

Trump derangement noted.

Protecting your fuhrer syndrome noted.

Is he really? Especially recently, Elon and Trump have been sharing the same advisor for moral standards. The egg on Twitter, it’s how they call it and it speaks to them.

“Just tweet cofefe!” – “Call that guy a pedo!” – “Oh come on, just start a fight with someone!” – “Just pretend you want to take Tesla private!”

Thing is, no one of both will face any kind of consequence for their actions. Not Trump, nor Musk. Maybe Musk will get a scolding and pay 10k. So what? That’s peanuts to him…

I’m confident that Tesla will weather this. They’re the undisputed EV leader at this time. A time when EVs are so desperately needed. As for Musk — this is unlikely to go much further than a fine in the worst case. It’s more likely, IMO, that he was duped into making rash statements by the Saudis.

Hmmm, no, I don’t think the Saudis are putting drugs in Elon’s drinking water to cause him to occasionally make foolish “unfiltered remarks” (to put it politely) on Twitter. I think he developed that habit without any help from anyone.

What Elon stated, by claiming “funding secured” in a public forum, was to make a material statement quite significant to the future of Tesla. Elon knows better than to make such material statements without care and planning; the fact that he did so anyway is no one’s fault but his own. It seems possible to me that he was in a “chemically altered state of consciousness” when he made that tweet. But even if so, that’s still his own fault.

A mere bagatelle.

Not much doubt that the intent of the tweet was to put a hurt on the shorts. The only issue is the level of proof required for criminal and/or civil penalties.

I hope Elon has learned his lesson about being impulsive. Just settle this with the SEC, settle the pedo tweet case, and stop being a dumbass on Twitter.

VERY strongly agree. Tesla needs to appoint an Executive VP of Restraint, who is obligated to slap Elon’s phone out of his hand at every opportunity.

But seriously — why the heck is he on Twitter at all? Why doesn’t Tesla funnel ALL social media interaction through communication specialists? Elon has better things to do, even beyond the “funding secured” and “pedo guy” incidents.

Why is Elon on Twitter? Because it’s a very important part of Tesla’s free advertising campaign, and it’s a remarkably successful one. Those who say Elon should give up his tweets don’t at all understand just how important those are to Tesla’s ability to maintain a fairly high level of “media buzz” without having to use paid mass advertising.

But there really does need to be someone in between Elon and his Twitter account, to act as censor when Elon has another attack of foot-in-mouth disease. 😉

IMHO Tesla should use Twitter. Elon Musk not so much.

Yea, it’s like with Trump and his twitter.

For normal people it’s mostly embarrassing, but there are some extreme followers that really like the weird tweets and since journalists hang around twitter all day these days, you get easy coverage, if you are as famous as Musk, or Trump.

In one case it wins elections, in the other one it sells cars.

If the founds are from Russia no problem, Elon is safe.

“The Tesla share price, which has been under siege since it became clear it would not go private. reacted strongly to the news, sinking back down below $300. At the time of this writing it is down −$10.84 (3.68%) at $283.75.”

I find this description of events rather puzzling. When I checked to see how the stock market reacted to this news, it was down ~4% at that time. I regard this as a very mild response to what appears to be something quite serious. As volatile as Tesla’s stock is, it seems to me that a mere 4% drop is the market saying “Meh… who cares?”

Perhaps in coming days it will become more clear why most investors seem to be shrugging this off, but at the moment I confess to being rather perplexed.

Pushmi – Traders knew SEC/DOJ investigations were inevitable, That’s why TSLA fell below 300 instead of returning to the $350 range once the go-private deal fizzled.

Today’s stories said the DOJ was investigating the company, not just Musk personally. That was a bit of a shock, causing an immediate drop, but may not be accurate. Timing also played a role in today’s stock price action — traders who thought they could safely play the Q3 production update got caught off-guard.

Overall, though, a DOJ investigation was expected and already priced into TSLA.

Thanks for explaining. I wasn’t at all surprised to read that the SEC was investigating what Elon foolishly blurted out on Twitter, since that was a significant material statement about Tesla’s business, and at the very least it should have waited until after the stock market was closed for the day. But I don’t know that much about the stock market, and I didn’t realize this was serious enough to attract the attention of the DOJ.

DOJ and SEC almost always work together on high profile investigations. After they sift through evidence they’ll decide which agency should take the lead.

Some might find meaning in the DOJ actively requesting materials instead of just reviewing whatever the SEC gathers. I can’t read those particular tea leaves that closely. It’s still early in the process. Absent a smoking gun I don’t expect to hear anything official for 3-6 months.

I hope the DoJ/SEC do more than a hand slap. Elon needs someone to knock some F’ing sense into him, and literally the government is the only entity that can do it. Forcing him to step down as CEO would be an appropriate step.

Step down? Is the gov now in charge of naming CEOs of companies? Dude, did you hit your head that hard?

LMAO, MadBro is more worried about his own GM job as Tesla keeps grows and taking away future market share from the laggards.

The SEC does not choose CEOs, but they do have the power to bar people from serving as officers and/or directors. The SEC’s 2006 settlement with Martha Stewart, for example, included a 5 year ban. She returned to MSO’s board in 2011 and became chair again in 2012.