Electric carmaker Tesla says the US Department of Justice has opened an inquiry into the CEO's public statements about taking the company private. The investigation raises more concern about the automaker's leadership.
Image: picture alliance/AP Photo/K. Sato
Advertisement
Tesla said on Tuesday the US Department of Justice was investigating Chief Executive Elon Musk's public statements in August that he was considering taking the electric carmaker private, the latest and biggest threat to Musk's leadership.
The company said that the Justice Department asked Tesla for documents about Musk's announcement, describing it as a "voluntary request," since they had not received a subpoena or a request for testimony. The company said it was co-operating and that the matter "should be quickly resolved."
The probe by the Justice Department, which can press criminal charges, comes on top of a civil probe by the Securities and Exchange Commission and shareholder lawsuits.
Recently Musk has also been criticized for other erratic behavior, including appearing on a podcast appearing to smoke marijuana and giving a tell-all interview to The New York Times in which he admitted to feeling overwhelmed and unable to sleep over his company's ambitious production targets.
A Twitter surprise
Musk surprised investors on August 7 when he announced his plan on Twitter to take Tesla private, tweeting that he had "funding secured" for a deal that would have valued the company at $72 billion (€61.6 billion). In a separate tweet, he wrote: "Investor support is confirmed."
Tesla's shares jumped after his tweet, but many people were skeptical that the tens of billions of dollars needed for the buyout would materialize. Normally such a major announcement would be explained in detail beforehand to regulators and not announced on a private Twitter account in two sentences.
After two weeks of uncertainty Musk abruptly abandoned the plan of going private on August 24, saying it would be more time-consuming and distracting than anticipated, and that "most of Tesla's existing shareholders believe we are better off as a public company."
Tesla's stock, which has lost about 25 percent since its gains after Musk first tweeted about going private, fell 3.5 percent on Tuesday. Despite this the company's market capitalization remains well above that of Ford and only slightly behind that of General Motors.
But is it a crime?
Legally speaking there is a fine line here between recklessness and intentional market manipulation — in this case to possibly harm short-sellers, who have sold stock and hope to make a profit by buying it back for less later on.
"Any criminal investigation takes this up a level and creates more danger for the company and Musk," said Peter Henning, a lawyer who worked for the SEC and the Justice Department.
To charge Musk with a crime, the Justice Department would need to show that he intended to manipulate the company's stock price, said Henning, now a law professor at Wayne State University in Detroit.
For a civil enforcement action, the SEC would only need to show that Musk acted negligently, which is easier to prove, he said. The SEC could subject Musk to civil penalties such as fines, relinquishing improper profits and more seriously a ban on running public companies.
From colonies on Mars to Hyperloop — Elon Musk's multifarious projects
Billionaire investor and tech entrepreneur Elon Musk has always done things his own way, from designing space rockets to manufacturing electric cars. Here's a look at some of his grand futuristic projects.
Image: AFP/Getty Images/J. Lampen
A serial entrepreneur
Tech visionary Musk intends to revolutionize transportation, both on earth and in space, and the way humans lead their lives. Over the past two decades, the South African-born American entrepreneur has emerged as one of Silicon Valley's most recognized faces worldwide. Musk was cofounder of Paypal, which was acquired by eBay for $1.4 billion (€1.2 billion) in 2002.
Image: picture allianc/dpa/A. Sokolow
Eying space
In 2002, Musk founded SpaceX, an aerospace manufacturer and space transport services company currently valued at over $20 billion. He wants to make space travel cheaper and, eventually, enable human life on Mars, thus giving human kind a chance at becoming multi-planetary species.
Image: Reuters/T. Baur
A mission to Mars
SpaceX's Falcon and Dragon rocket programs both already deliver payloads into Earth's orbit. The company has said it wants to launch its Mars-bound cargo flight in 2022, followed by the first Mars flight with passengers in 2024.
Image: picture-alliance/dpa/Press Association Images/Spacex
Transforming transportation
After founding SpaceX, Musk set up Tesla in 2003 to come up with electric autonomous vehicles and renewable energy solutions. But production bottlenecks have plagued the company, with much of its future banked on the Model 3, its first mid-price, mass-market vehicle.
Image: Reuters/Tesla
Really big Teslas are coming
After the foray into electric cars, Musk last year opened a new chapter in his book of visions as he unveiled the prototype of a futuristic all-electric heavy truck. The vehicle — dubbed the Tesla Semi — is set to go into production in 2019. It would boast 500 miles of range, a battery and motors that will last 1 million miles and cheaper total operating costs than diesel models, Musk claimed.
Image: Reuters/A. Sage
Roofs made of solar tiles
Besides running SpaceX and Tesla, Musk has also invested in the solar energy company SolarCity to turn his vision of a solar-powered future into a reality. Musk said houses equipped with Tesla's Solar Roof would feed energy to Powerwall, a sleek storage unit designed to act as an electricity fill-up station for both the house and a Tesla electric car.
Image: picture-alliance/Newscom/Tesla/UPI
Dreaming an electric future
In 2015, Musk unveiled Powerwall, a home battery unit with a selling price of $3,500 for 10kWh and $3,000 for 7kWh. The Powerwall can be controlled via one's phone, from anywhere. But slow production rates have proved to be a problem.
Image: Reuters/P. T. Fallon
Hyperloop
Hyperloop came into global prominence after it was proposed by Musk in 2013. It is viewed as a next-generation transportation system — a "fifth mode" of transport (after planes, trains, cars and boats). It uses magnetically-levitated pods and sealed partial vacuum transit tubes to move people and freight at supersonic speeds estimated to reach over 700 miles per hour (1,127 kilometers per hour).
Image: picture alliance/AP Photo/SpaceX
Merging brain with AI
In 2016, Musk co-founded Neuralink, a neurotechnology startup that is reportedly trying to create brain-computer interfaces by integrating the human brain with artificial intelligence (AI). The project is currently at an early stage of development.
