SEC looking into Tesla after Elon Musk's tweets, reports say

Danny Moloshok  Reuters

But as the dust settles on Musk's latest Twitter escapade, questions remain over whether the Tesla chief executive broke SEC guidelines by tweeting the news.

The issue of share accumulation by outsiders emerged only recently as reports that Saudi Arabia's public investment fund had built up a stake from 3 to 5 percent after its offers of purchase of new shares in Tesla were spurned by the company.

Trading on the company's stock was halted Tuesday after Musk tweeted that he was considering taking Tesla private.

However, it certainly looks like his messages on social media have had direct consequences on Elon Musk's personal fortune, and on his company's stock price: Tesla shares started Tuesday trading at about $340 and went as high as $387.

Despite the board's statement, it was clear early Wednesday that the euphoria had worn off over Musk's bold claim that he had the funding secured to take the electric-car maker private. The company declined to comment beyond pointing to an all-employee email sent Tuesday by Musk.

The move to take the company public would remove Musk, who himself has a 20 percent stake, from the public arena - and contentious criticism.


He explained that, ideally, he would restructure the company in a similar manner to his other company, SpaceX, giving employees shares of the company and allowing them to buy or sell them periodically.

Going private is one way to avoid close scrutiny by the public market as Musk and the company face those challenges. But going private could also complicate Tesla's effort to build a mainstream electric auto by removing the easy access to capital the Wall Street darling has enjoyed. However, they may balk if Tesla becomes even more leveraged and risky in the process of going private.

The whole thing isn't yet set in stone because it must be put to a shareholder vote.

Midway through the trading session in NY on Wednesday, Tesla shares were down 5% at $374 after surging 11% on Tuesday. The stock is far below the $420 price at which Musk said shareholders would be bought out. Tesla is a legendary cash-burner, with roughly $10 billion in debts and $2 billion in reserves, and Musk would probably need in the tens of billions of dollars to buy out shareholders at the right price.

The SEC is also reportedly looking into whether Elon's use of Twitter constituted sufficient disclosure. He called the funding "secured" for what would be the biggest-ever corporate buyout, but he hasn't disclosed details.

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