Tesla Inc. is under investigation by the Justice Department over public statements made by the company and Chief Executive Elon Musk, according to two people familiar with the matter. The criminal probe is running alongside a previously reported civil inquiry by securities regulators.
Federal prosecutors opened a fraud investigation after Musk tweeted last month that he was contemplating taking Tesla private and had “funding secured” for the deal, said the people, who were granted anonymity to discuss a confidential criminal probe. Musk’s tweet initially sent the company’s shares higher.
Tesla confirmed it has been contacted by the Justice Department.
“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,” the company said in a statement released Tuesday following Bloomberg’s report of the investigation. “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 investigation by the U.S. attorney’s office in the Northern District of California follows a subpoena issued by the Securities and Exchange Commission seeking information from the maker of electric cars about Musk’s plans to go private, which he has since abandoned.
Tesla shares dropped as much as 7% on Tuesday morning to an intraday low of $275.50 before recovering somewhat.
Tesla didn’t have an immediate comment. Abraham Simmons, a spokesman for the U.S. attorney’s office in San Francisco, declined to comment.
SEC enforcement attorneys in the San Francisco office were already investigating Tesla before Musk sent his tweet on taking the company private. The existing investigation focuses on whether Tesla had issued misleading pronouncements on manufacturing goals and sales targets, according to two people familiar with the matter.
Musk exposed himself to legal risk by tweeting Aug. 7 that he had the funding for a buyout even though that may not have been the case. Almost a week later, Musk said the basis for his statement was conversations with Saudi Arabia’s Public Investment Fund, which first expressed interest in helping take the company private in early 2017.
Tesla’s board then said that it hadn’t received a formal proposal from Musk, who also is the board chairman, nor had it concluded whether going private would be advisable or feasible. Less than three weeks after his initial tweets, Musk abandoned the effort to take the company private.
Now that Musk’s tweeting has attracted the Justice Department’s attention, investigators there could extend their review to other public statements he made about the company’s health, one of the people familiar with the matter said. Authorities could also look into the circumstances surrounding the resignation of Tesla’s chief accounting officer, Dave Morton, after less than a month on the job, the person said.
Morton, a former chief financial officer for computer hard-drive maker Seagate Technology, joined Tesla the day before Musk tweeted that he was considering buying out some investors at $420 a share and taking the company private.
Schoenberg and Robinson write for Bloomberg.
11:40 a.m.: This article was updated with a statement from Tesla.
This article was originally published at 9:55 a.m.