S.E.C. Subpoenas Tesla Over Elon Musk’s Tweet About Going Private

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The U.S. Securities and Exchange Commission served Tesla with a subpoena following CEO Elon Musk’s controversial tweets about taking the company private.

Musk offered no details of his funding until August 7, when he told investors that he was in talks with Saudi Arabia’s sovereign wealth fund and other potential backers, even though that financing was not yet secured.

Musk’s tweets may have violated U.S. securities law if he misled investors. According to an SEC rule, a company’s public statements must be true. Each of Tesla’s directors has received a written legal order to testify in the matter. A subpoena is a first step in a formal inquiry and subsequently, an investigation, which can take years to yield any action or none at all.

Tesla’s shares fell by 3% in afternoon trading, and although the company ranks #3 overall in The Harris Poll’s 2018 Reputation Quotient study, and ranked #1 out of the 100 most visible companies in the U.S. for its “vision and leadership,” Musk continues to face criticism for being a brash, scrappy iconoclast and it remains to be seen how his latest actions will affect the company.

Readers of the popular electric transportation and sustainable energy news site, Electrek, however support Musk’s decision to take the company private. Agreeing with his key rationale for the move:

“…the reason for doing this is all about creating the environment for Tesla to operate best. As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders. Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term. Finally, as the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company.”