WASHINGTON—Securities regulators have inquired with
about Chief Executive
surprise announcement that he may take the company private and whether his claim was factual, people familiar with the matter said.
The Securities and Exchange Commission has asked whether Mr. Musk’s unusual announcement on Tuesday was factual, the people said. The regulator also asked Tesla about why the disclosure was made on Twitter rather than in a regulatory filing, and whether the company believes the announcement complies with investor-protection rules, the people said.
Mr. Musk on Tuesday proposed taking Tesla private at $420 a share, about 11% higher than the day’s closing stock price. He called the funding “secured” for what would be the biggest-ever corporate buyout, but he hasn’t disclosed details. A group of Tesla board members on Wednesday said Mr. Musk spoke to them last week about taking the company private.
The SEC’s inquiries, which originated from its San Francisco office, suggest Tesla could come under an enforcement investigation if regulators develop evidence that Mr. Musk’s statement was misleading or false.
It wasn’t immediately clear on Wednesday whether the regulator had opened a formal enforcement investigation based on the answers it received from the company. An SEC spokesman declined to comment.
Under U.S. law, companies and corporate officers can be held liable for making misstatements or omitting information that shareholders need to make informed investment decisions. Mr. Musk could be in trouble if regulators develop evidence that he made a statement only intending to goose his company’s share price.
Mr. Musk has been at war with short sellers, investors who are betting Tesla’s stock price will decline, and has used Twitter before to joust with them. On May 4 he tweeted: “Oh and uh short burn of the century comin soon.” He wrote on the same day: “The sheer magnitude of short carnage will be unreal.”
Mr. Musk, in an email to employees on Tuesday, cited short sellers and other pressures public markets put on companies as factors in announcing he wanted to take the company private.
The SEC generally allows companies to disseminate news using social media as long as they have told shareholders they might use those channels in addition to regulatory filings. Tesla told investors in a November 2013 filing to follow Mr. Musk’s Twitter feed for “additional information” about the company.
Tesla didn’t immediately respond to a request for comment.
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