Elon Musk Faces Criminal Investigation, Shares Of Tesla Drop

Photo by OnInnovation via Flickr

The shares of Tesla have dropped after the US justice department announced the launch of a criminal investigation into the comments of Elon Musk, its CEO and founder, about taking the firm private.

According to Bloomberg, the share price of the company tumbled by more than 4 percent after it was revealed that federal prosecutors had launched a fraud investigation.

The investigation centres on the statements that Musk made on Twitter last August, in which he said that he was considering taking the firm private at a value of $72bn (£54bn). He also said that he had “funding secured.”

Tesla confirmed that it received a voluntary request for documents from the DOJ after the comments of Musk. It said that it had been “co-operative” in replying, however, it had not received a subpoena.

The shares of the electric carmaker have now dropped by 21 percent since the infamous Tweet of Musk were posted on the 7th of August.

At the end of last month, he said that he would no longer be taking the firm private after experiencing a backlash from its shareholders.

The investigation will run alongside a separate civil inquiry of the Securities and Exchange Commission (SEC) into the comments of Musk. Many interpreted the comment as an attempt to undermine short-sellers who had their bets against the stock of Tesla.

The chief executive of Gerber Kawasaki, Ross Gerber, said: “The government will try to prove Elon Musk never wanted to go private and it was a fraud.” Gerber Kawasaki is an investment management company

“That seems like a very steep hill to climb – I get SEC and a fine.”

In another blow for the electric carmaker, the sovereign wealth fund of Saudi Arabia, which has built a $2bn stake in the firm, invested $1bn into Lucid Motors, Tesla’ electric car rival.

The move will allow Lucid to begin producing its first model in 2020.

Last week, Nomura Instinet analyst Romit Shah, one of the biggest bulls of Tesla, downgraded the firm from buy. He said that it was “no longer investable.” He cited the “erratic behaviour” of its CEO.

The billionaire has also been sued by Vernon Unsworth, a British diver, following a bizarre outburst, which again happened on Twitter, in which Musk said that Unsworth is a paedophile. Musk also came under fire for smoking cannabis on the podcast of Joe Rogan, a comedian, in what has been a tumultuous month.

High-profile departures, including that of Dave Morton, its chief accounting officer, after only a month in the job, and Gaby Toledano, its HR executive, have also affected the firm in the past weeks.

In a statement, Tesla stated: “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.”

It added: “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.”