WASHINGTON — U.S. regulators are likely to focus on whether Elon Musk was telling the truth when he said on Twitter that he’d secured funding to take electric-carmaker Tesla Inc. private in what could be the biggest buyout in history.
The Securities and Exchange Commission is questioning the company whether the chief executive officer’s tweets were statements of fact and why he chose to make the disclosure using social media instead of through a filing, The Wall Street Journal said Wednesday, citing unidentified people familiar with the matter.
The SEC has established that companies can use social media to announce material and potentially market-moving information. But securities lawyers warned that Musk could find himself in legal difficulty if the “funding secured” portion of his statement posted on Tuesday was untrue or half-baked.
“To put that out unless he absolutely has financing secured and is ready to make the bid that could be market manipulation,” said Keith Higgins, a Ropes & Gray partner who formerly led the SEC’s corporation finance unit. “He could be in big trouble if that turns out not to have been true.”
Judith Burns, an SEC spokeswoman, declined to comment. Tesla also declined to comment.
Tesla hasn’t disclosed any sources of financing for the deal and no one has stepped forward publicly to say they’re backing the plan. On Wednesday, less than 24 hours after Musk’s initial tweets, company board members said they had been made aware of Musk’s plan last week — raising a whole different set of questions about whether SEC rules were violated.
Companies are required to fill out an SEC form known as an 8-K to tell shareholders about major events. For the most significant matters, corporations get four business days to file. While there are plenty of examples of companies being fined for failing to meet the deadline, it’s unclear that the board learning of Musk’s plan would trigger that requirement.