Tesla shares tumbled more than 4 percent Monday after the electric auto maker said it was hitting the brakes on CEO Elon Musk's idea to take the company private - and reports that Volkswagen was among the interested investors.
Musk and Tesla are facing investor lawsuits and a US Securities and Exchange Commission investigation into the truthfulness of the CEO'S August 7 tweets, according to an August 8 report by the Wall Street Journal. The bold tweet sent Tesla's stock skywards but it also drew intense scrutiny.
United States securities law requires public company executives to have a "reasonable basis" on which to make representations to the investing public, and that would likely be the focus of an SEC probe, said three securities lawyers.
But even after Musk abandoned his plans to take Tesla private, experts say the potential regulatory and legal troubles for Tesla remain.
U.S., Mexico reach NAFTA deal; talks with Canada to start immediately
The preliminary deal also says that 40 to 45 percent of the auto content must be made by workers earning at least $16 an hour. Significant breakthroughs between Mexico and the US came during the past several days on automobiles and energy.
Well, turns out that deal was not exactly done, the funding far from secured.
Musk had hired advisers including Goldman Sachs Group Inc. and Silver Lake as well as Morgan Stanley. Banks had at most just a couple of weeks to assess the situation, after being brought in to advise only after Musk's initial tweet, said the people, who asked not to be identified as the details aren't public. It finally became clear, by Musk's own admission, that it was not.
Another statement in the blog that could catch the eye of SEC officials is Musk's reference to his discussion with Tesla's board on Thursday, during which both parties decided not to pursue the deal, said M. Ridgway Barker, a partner and chair of the corporate finance practice at law firm Withersworldwide.
"We see the company raising $2 billion in 4Q18, through convertible debt, which may prove a challenge if there still is an ongoing SEC case open", Cowen and Co analyst Jeffrey Osborne wrote in a client note.
Musk also indicated he was unaware how challenging the process would be and did not want to distract from the goal of ramping up production of the Model 3 sedan. Musk's exhaustion, which the CEO described in a New York Times interview, is the "most critical near-term concern".