Elon Musk speaks on stage during the Westworld Featured Session during SXSW at Austin Convention Center on March 10, 2018 in Austin, Texas. Tesla whistleblower Martin Tripp — who CEO Elon Musk characterized as a saboteur and disgruntled ex-employee — is slated to meet with the U.S. Securities and Exchange Commission, his attorney Stuart Meissner told CNBC. Meissner also shared this development on Twitter. tweet The SEC did not reply to a request for further information. Tesla declined to comment on the matter. In his complaint with the commission, Tripp alleges that Tesla has made several "material omissions and misstatements" to investors and taken steps that potentially compromised the safety of its customers. An interview with regulators could ignite a new SEC investigation into Tesla, could be used in ongoing investigations or could go nowhere at all. As a general rule, the SEC does not offer details or comments about ongoing investigations. This is not the first time the SEC has tangled with the electric vehicle maker. According to public records attained by the independent research firm, Probes Reporter, Tesla faced but did not disclose an SEC investigation into the Model 3 in 2016, which closed without enforcement action. The firm is tracking additional, undisclosed SEC investigations into SolarCity and Tesla. Probes Reporter CEO John P. Gavin said:<doc-sep>The Wall Street Journal reported Wednesday that the SEC has, in fact, "made inquiries" to find out whether his claim was true, citing people familiar with the matter. Whether it was an impulse tweet or not, it's likely that the Securities and Exchange Commission has already opened an investigation and is looking for documentation to back up Musk's comments, former SEC enforcement lawyers say. That regulation is the one the Tesla CEO may or may not have violated when he sent the markets into a frenzy and halted trading in Tesla's shares after nonchalantly tweeting Tuesday that he was thinking about taking the electric car company private and had "funding secured," securities lawyers say. Elon Musk's lawyers are probably poring over rule 14e-8 of the Securities Exchange Act of 1934 right about now. "I can't imagine that the enforcement division hasn't opened a file, that they are not calling his counsel or him and saying 'we would like whatever papers you have about this, if you have written anything down, if you have talked to lenders, if you have materials about that we would like to see them,'" said Tom Gorman, a former senior enforcement attorney with the SEC and a partner at Dorsey & Whitney in Washington, D.C. "'And right after we have finished seeing all that stuff, we would like to talk to you.'" Investors aren't so convinced that Musk has actually secured funding. If not, that would spell big trouble for both Musk and his company. "There is skepticism as to where this money comes from. It doesn't make sense," Efraim Levy, an analyst at CFRA, told CNBC. "The reason it is trading at a discount is because of uncertainty as to whether the deal will come to fruition. If it doesn't come through, the stock is going to crater." The SEC's rule 14e-8 basically prohibits publicly traded companies from announcing plans to buy or sell securities if executives don't intend to follow through, don't have the means to complete the deal or are flat out trying to manipulate the stock price. § 240.14e-8 Prohibited conduct in connection with pre-commencement communications. It is a fraudulent, deceptive or manipulative act or practice within the meaning of section 14(e) of the Act ( 15 U.S.C. 78n) for any person to publicly announce that the person (or a party on whose behalf the person is acting) plans to make a tender offer that has not yet been commenced, if the person: (a) Is making the announcement of a potential tender offer without the intention to commence the offer within a reasonable time and complete the offer; (b) Intends, directly or indirectly, for the announcement to manipulate the market price of the stock of the bidder or subject company; or (c) Does not have the reasonable belief that the person will have the means to purchase securities to complete the offer. "He is claiming there is a specific source of the funding so that had better be true. He has also claimed there is a specific amount available for funding. That has to be true. Otherwise, even if it's not manipulation it would be fraud, so he's got two potential areas of difficulty right there," former SEC Chairman Harvey Pitt told CNBC. Tesla still hasn't said where it's getting the more than $71 billion it would cost to take the company private. Wall Street bankers also don't know, suggesting Musk has secured financing elsewhere. But that seems implausible given the size of the deal, which would require multiple banks, and cult-like interest in Musk and Tesla, dealmakers and analysts say. "News of the deal would have leaked had Tesla already held discussions to secure funding," UBS analyst Colin Langan wrote in a research note Tuesday. Musk's first tweet at 12:48 p.m. — "Am considering taking Tesla private at $420. Funding secured." — started a trading frenzy that drove shares to an intraday high of $387.49 — $45.47 above Monday's closing price. That comes to $7.72 billion with its 169.8 million shares outstanding, more than enough to squeeze short sellers who bet the price would fall. Musk's frequent complaints about "relentless attacks from short sellers" have raised questions about whether or not he was intentionally trying to drive the shares higher, which would meet the definition of market manipulation and carry possible criminal penalties, securities lawyers say. The comments also might ease some financial pressure on the carmaker by moving an important convertible bond above its conversion price. If Tesla's shares are above $359.87 when the debt matures Dec. 1, the bondholders can decide to convert the debt into stock rather than triggering a cash payout of $920 million when the debt is due come March. Moody's specifically cited that bond issuance and the company's cash burn rate as reasons for downgrading Tesla's credit rating in March. Tesla's skeptics have called into question the state of the company's financial position. It lost nearly $2 billion last year, and so far this year it burned through about $1.8 billion in cash after capital investments through two quarters. The company had $2.2 billion in cash at the end of the June quarter. "If his comments were issued for the purpose of moving the price of the stock, that could be manipulation. It could also be securities fraud," Pitt, now CEO of consulting firm Kalorama Partners, told CNBC's "Squawk Box." "The use of the specific price for a potential going private transaction is highly unprecedented. And therefore raises significant questions about what his intent was." If Musk's statements weren't true, he runs the risk of paying damages to investors who lost money on his tweets as well as criminal prosecution, Pitt said. Peter Henning, a law professor at Wayne State University, called it "backwards corporate governance." "You don't announce a price and then negotiate. There are a lot steps left in this," he said. "There is a whole process they have to go through or they are going to get the daylights sued out of them." Investors, meanwhile, are still confused. Tesla's stock price is a good gauge of how much investors believe Musk. In general, if investors are confident in a deal, shares will rise close to whatever offering price is announced, which would be $420 in this case. "However, if investors think there''s a 50/50 chance the deal with go through, the price will walk up halfway, between $340 and $420, which would be $380," Yale University finance professor Jacob Thomas told CNBC. "Given a post-tweet price of $380, roughly speaking, investors think the probability is about 50 percent." As investor confidence fluctuates, so does the price, rising toward $420 the more convinced they are or back to $340 if they are skeptical, he said. Tesla's stock fell 2.4 percent Wednesday to close at $370.34 a share. — CNBC's Berkeley Lovelace, Tae Kim, Alex Sherman and Hugh Son contributed to this article.<doc-sep>Tesla extended declines Thursday as investors questioned the ability of Elon Musk to take the company private and reacted to reports of a potential probe into Tweets by the founder and CEO that claimed he had "funding secured" for the $72 billion purchase. More questions than Model 3s? Tesla (TSLA) - Get Report shares extended declines Thursday as investors questioned the ability of Elon Musk to take the company private and reacted to reports of a potential probe into Tweets by the founder and CEO that claimed he had "funding secured" for the $72 billion purchase. The Wall Street Journal reported Wednesday that the Securities and Exchange Commission is looking into the veracity of Musk's Tweet, which was sent at 12:48 eastern time on Tuesday, Aug. 7, and why the CEO opted to inform investors of his plans via social media as opposed to a formal filing with regulators. Those questions were intensified by a statement signed by six members of Tesla's nine-member board yesterday which said that "several" discussions about taking the group private were held last week. "Elon opened a discussion with the board about taking the company private," the statement said. "This included discussion as to how being private could better serve Tesla's long-term interests, and also addressed the funding for this to occur." Tesla shares were marked 3% lower in the opening 30 minutes of trading and changing hands at $359.16 each, a move that would still leave it around 4.8% higher than before Musk's "considering taking Tesla private at $420. Funding secured" Tweet at mid-day Tuesday, but more than $10 billion shy of his proposed takeout value. SEC public affairs spokesman Chris Carofine told TheStreet that the agency is declining to comment. Taking Tesla private at Musk's stated value would likely require the biggest leverage buyout in U.S. corporate history, a tactic that could prove incredibly challenging for a company that burned through $740 million in cash each quarter, has a issuer credit rating of B3 at Moody's Investors Service, struggles under a $10.9 billion debt pile and has consistently failed to meet its own production and delivery targets. That said, with Saudi Arabia's reported $2 billion stake, and its association with SoftBank Corp.'s (SFTBY) tech-focused Vision Fund, Musk could find potential sources of debt capital to fund the billions needed to pull Tesla from listed markets. China's Tencent Holdings (TCEHY) , as well, could seek to lever its 10% stake in an LBO transaction given Musk's plans to build a gigafactory in Shanghai as part of his plans to sell Tesla sedans into the world's biggest car market. One concern investors may have with respect to Tesla's potential funding relates to recent moves by the Trump administration to consider import tariffs on the auto sector under Section 232 of the Trade Expansion Act, which allows for such moves under the broader guise of national security. Although that decision is currently under consultation, its debate could influence non-U.S. funding sources, such as Saudi Arabia's sovereign wealth fund, which has reportedly built a $2 billion stake in the Palo Alto, Calif.-based carmaker, and SoftBank Corp. of Japan, which has close ties to the Chinese government. More on Tesla's Future From TheStreet Both would face scrutiny from the Committee on Foreign Investment in the United States, or CFIUS, an inter-agency panel that examines foreign investment plans and is chaired by Treasury Secretary Steve Mnuchin. Tesla's recently-announced plans to open gigafactories in China, while simultaneously laying off workers at its production facilities in Southern California, would likely mean a longer, more detailed probe into external investment plans from CFiUS amid Trump's "Buy American, Hire American" trade policy. "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," Musk told investors.<doc-sep>
Tesla is likely to face investigation by US securities market regulators following the CEO Elon Musk’s extraordinary tweet that he had “funding secured” to take the company private, according to a media report. Shares in the money-losing carmaker fell sharply in New York after the Wall Street Journal reported that the Securities and Exchange Commission is making “inquiries” and quoted former SEC lawyers as saying that investigators were looking for documentation to back up Musk’s claims. According to the Journal, the SEC’s inquiries originate from the agency’s San Francisco office. The SEC declined to comment. If Musk’s claim turns out to be false, he risks civil and possible criminal penalties. Shares dipped again after Bloomberg reported regulators had been looking into Tesla prior to Musk’s tweets and were now intensifying their scrutiny of Tesla Inc.’s public statements, including statements on manufacturing goals and sales targets. The specific regulation lawyers believe Musk could have broken in his “funding secured” tweet is 14e-8 of the Securities Exchange Act of 1934, which prohibits publicly traded companies from announcing plans to buy or sell securities if executives don’t intend to complete, don’t have the means to complete, or are trying to manipulate the stock price. Musk’s claim that he has secured funding, if in fact he does not, could expose him and his company to lawsuits. “He is claiming there is a specific source of the funding so that had better be true,” the former SEC chairman Harvey Pitt told CNBC. “He has also claimed there is a specific amount available for funding. That has to be true. Otherwise, even if it’s not manipulation, it would be fraud, so he’s got two potential areas of difficulty right there.” So far, no Wall Street institution has claimed any knowledge of negotiations to raise any of the $70bn it would cost to take the company private. Musk could have raised the money from a sovereign wealth fund, wealthy individuals or a private equity fund. According to a statement from six of Tesla’s nine directors, Musk raised the go-private possibility with the board last week. They said he had “addressed the funding for this to occur” without providing details. Musk has in the past tweeted assertions that sounded like more than they were. In July 2017, Musk tweeted that he had received “verbal govt approval” to build a high-speed hyperloop connecting New York, Philadelphia, Washington DC and Baltimore. A White House adviser later dampened those claims and said Musk had signaled “excitement” not approval. After Musk’s Twitter claim on Monday that “investor support is confirmed” to take Tesla private, the California State Teachers’ Retirement System, which owns about 213,000 shares as one of the largest institutional investors in Tesla, said it had not been contacted by Musk or the firm before the announcement. The “funding secured” tweet has, in any event, focused investors on Tesla’s finances – and Musk’s executive leadership of it. “If no firmer details emerge investors would likely increasingly debate Musk’s credibility and seemingly unhealthy focus on the shares’ price and volatility, ” wrote Bernstein analyst Toni Sacconaghi in a note to clients. The company lost nearly $2bn last year, and has burned through about $1.8bn in cash as it ramps up production on the Model 3. At the end of the June quarter, the company had $2.2bn in cash reserves. Tesla’s stock, which rose 11% on Tuesday after Musk’s statement from $342 to $379, has since dropped back to $352. If, as some analysts suggest, Tesla’s stock is a measure of confidence in Musk himself, it’s well below the $420 at which Musk said shareholders would be bought at. “The reason it is trading at a discount is because of uncertainty as to whether the deal will come to fruition,” Efraim Levy, an analyst at CFRA, told CNBC. “If it doesn’t come through, the stock is going to crater.” But if a buyer emerges, that too could spook the markets, warned Nick Colas at DataTrek Research in a client note, since it could mark a risk-taking peak for corporate America. Colas compared a Tesla sale to RJR Nabisco’s take-private in 1988, AOL’s purchase of Time Warner in 2000 or Goldman Sachs’ bundling of toxic mortgages in 2007, all bad, era-defining deals. “While we are not superstitious by nature, we do fear this transaction looks an awful lot like other deals done at the peak of prior cycles,” Colas wrote, and gave it a name: “Tesla top”.