What happened
Shares of electric-car company Tesla (TSLA +2.96%) took a hit Tuesday, falling as much as 6.6%. As of 1:45 p.m. EDT, shares were down about 4%.
The stock's slide follows news that the Department of Justice is investigating Tesla CEO Elon Musk's Aug. 7 comments on Twitter about possibly taking the company private, according to a Bloomberg article.
"Federal prosecutors opened a fraud investigation after Musk tweeted last month that he was contemplating taking Tesla private and had 'funding secured' for the deal," said the piece, citing anonymous sources.
The Model 3. Image source: Tesla.
So what
"Am considering taking Tesla private at $420," Musk wrote in the tweet last month. "Funding secured." The tweet initially sent shares soaring, with the stock rising 11% by the end of the trading day. But shares ended up tumbling as investors realized funding for the deal wasn't as secure as the tweet implied, and as Musk backtracked on considering taking the company private.
Tesla released a statement to CNBC on Tuesday in response to this news, acknowledging the Department of Justice did reach out to the automaker:
Last month, following Elon's announcement that he was considering taking the company private, Tesla received a voluntary request for documents from the DOJ and has been cooperative in responding to it. We have not received a subpoena, a request for testimony, or any other formal process. We respect the DOJ's desire to get information about this and believe that the matter should be quickly resolved as they review the information they have received.
This investigation is running alongside a probe by the Securities and Exchange Commission into Musk's tweet.
Now what
Investors are clearly concerned about the implications of the CEO's actions. Tesla shares have fallen about 25% since Aug. 7.
Negative outcomes from any investigation or probe could lead to legal action against Musk, and possibly even Tesla. Investors should keep an eye on this developing story, and hope for a quick resolution with immaterial consequences.
