Elon Musk is facing questions from the Securities and Exchange Commission (SEC) following his Tuesday tweets about plans to take Tesla private.
The SEC is reportedly making inquiries to find out whether Musk's disclosure via Twitter reflects real internal considerations by the company to go private at a price of $420 per share, or were intended to boost Tesla's stock price.
If the SEC believes that Musk tweeted with the intention of giving Tesla's stock price a goose - and to administer a financial drubbing for short traders who had bet that the company's share price would fall - he could face a formal investigation. The company also has certain conditions attached to some of its loans should its stock price fall below a certain level.
Musk's Tuesday tweets hit short traders for $783 million as the company's stock price rose in response. The named price of $420 per share effectively helped to underwrite the value of the company, before the stock price fell back on Wednesday. However, Musk also added: "Shareholders could either sell at $420 or hold shares and go private."
The company's stock price this morning is just over $370 - up from a low of $342.65 at midday on Tuesday - valuing the company at more than $63 billion.
While V3 questioned the SEC directly yesterday morning and received a ‘no comment' response, the Wall Street Journal claims that "people familiar with the matter" are "asking Tesla whether chief executive officer Elon Musk was truthful when he tweeted that he had secured funding for what would be the largest-ever corporate buyout".
In a staff memo, Musk went into more details for his reasons for taking the company private, but he admitted that "a final decision has not yet been made".
However, he justified consideration of the idea on the grounds that the swings in the company's stock price "can be a major distraction". Staff share options would remain, he added, but Tesla and SpaceX would not be merged.
He concluded: "Basically, I'm trying to accomplish an outcome where Tesla can operate at its best, free from as much distraction and short-term thinking as possible, and where there is as little change for all of our investors, including all of our employees, as possible."
The board of the company has confirmed that the company has considered a buyout. In a statement, six members of the board claimed that it had "met several times over the last week" to discuss going private. This "included discussion as to how being private could better serve Tesla's long-term interests".
While the discussions also covered funding, it is not clear for how long and in how much depth the privatisation plan has been considered by the company.
Short traders have targeted Tesla because of its consistent quarterly financial losses, and negative cashflow that could potentially see the company go out of business within a year or two without new funding. Musk, though, believes that his push to up production of the Model 3 will help increase revenues and drive the company into profitability.
While it took 325,000 reservations in its first week following its April 2016 unveiling, the company has struggled to iron out glitches and to increase production to a level that can satisfy demand.
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