Tesla Inc (NASDAQ: TSLA) Runs Afoul Of The Sec
Tesla Inc (NASDAQ: TSLA) is under intense scrutiny by the Securities and Exchange Commission on account of “incendiary” remarks by its celebrity CEO via his Twitter account. According to reports, Elon Musk, made public his intention to take the publicly traded company private. As shocking to investors as the remark is, it has been deemed irresponsible and goes against the principles of corporate business. As a result, there was a spike in the share price of the company. However, the attendant confusion and anxiety by the investors led to the trading of the firm’s shares to be halted on the NASDAQ. The share price later tumbled to just about the pre-tweet level after the news that the SEC might be looking into the case broke out.
The SEC fouled
The stir in the investors’ activities was not the only dust kicked up by the wake of the tweet. According to the dictates of the securities law, such important information should be made public through a regulatory filing. Better still, according to the Chicago Tribune, the information can be shared through mass media as long as the investors are informed in advance. It is in this light that the SEC is fishing for more information from the company. It is seeking to establish the veracity of the information shared by Musk. This means that there could be a case to be answered in the event that the tweet was merely meant to boost the company’s share price, the Wall Street reports.
Statement from the board
Furthermore, the board of directors has indicated that the CEO has previously shared his desire to take the company private. Through a statement released after the incident, the board said that it was in talks with advisors to expedite the going-private plans. However, the statement adds that the CEO should recuse himself from the process.
The way forward
The Wall Street Journal reports that this whole conundrum might be a tug of war between Mr. Musk and the short sellers. If truly this is what concerns the CEO most, there is a huge possibility that the going dark plans might succeed. Whether the plan will go through or not, it remains to be seen. The SEC will have to run the course of its investigation and the final ruling delivered. If there will be no case to answer, then the plan might continue. The planned going-private will also be highly contingent on the availability of funds to conduct the investor buyout.