Tesla Inc (NASDAQ:TSLA) is under investigation by the US Justice Department because of public statements made by the company and CEO Elon Musk over the go-private plan announced in early August, Bloomberg reported on Tuesday.
Federal prosecutors opened a fraud investigation over the tweets by Musk who said then that funding had been secured for the deal, the report said.
Am considering taking Tesla private at $420. Funding secured.— Elon Musk (@elonmusk) August 7, 2018
Tesla said in a statement they have received "a voluntary request for documents" from the Justice Department.
“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,” Tesla said.
Last month, the Tesla board formed a special panel which would have evaluated Musk's plan.
The proposal by Musk was eventually abandoned when it became apparent he did not have the funding to take the company private.
Musk was sued by some investors who accused him of misleading the market to burn those who were short on Tesla's stock.
Shares of Tesla dropped 4% to trade at US$283.08, having hit a session low of US$275.50 during Tuesday's session.
Baird Equity Research said probe will overhang Tesla stock, but fundamentals still look strong
Baird Equity Research senior analyst Ben Kallo said in a note to clients on the heels of the report that the "investigations will be an overhang on the stock until more information is released."
He said based on the facts available, "we believe Musk will be liable for fines" but any punishment will not necessarily extend to Tesla.
Still, Kallo reiterated their Outperform rating on the stock and set a price target for Tesla of US$411.
"We continue to believe fundamentals are strong headed into Q3 deliveries, but we acknowledge the noise around the stock makes it challenging to invest on fundamentals, currently," the analyst said.
Production in Tesla seems to be ramping "in-line with expectations, and we think 2H:2018 results could exceed estimates, particularly given our belief deliveries of the Performance Model 3 should contribute to higher ASPs," the Baird report stated.
Tesla develops, manufactures, and sells electric vehicles as well as batteries for energy storage.