Tuesday 18 September 2018 7:02 pm

Tesla shares plummet as Elon Musk faces criminal probe over going private comments

Reporter at City A.M. covering banking, markets and insurance

Reporter at City A.M. covering banking, markets and insurance

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Shares in Tesla have plummeted after the US justice department launched a criminal investigation into Elon Musk's comments regarding taking the company private.

The company's share price tumbled more than 4 per cent after it emerged that federal prosecutors had opened a fraud investigation, according to Bloomberg.

The probe centres on statements Musk made on Twitter last month, in which he said he was considering taking Tesla private at a value of $72bn (£54bn) and had “funding secured”.

Read more: Elon Musk's 'erratic behaviour' causes bank to downgrade Tesla stock

Tesla confirmed it received a voluntary request for documents from the DOJ following Musk's comments and said it had been “co-operative” in responding but had not received a subpoena.

The electric carmarker's shares have now fallen 21 per cent since Musk's infamous Tweet on 7 August.

At the end of August he said he would no longer be taking the company private following a backlash from shareholders.

The investigation will run alongside a separate Securities and Exchange Commission (SEC) civil inquiry into Musk's comments, which many interpreted as an effort to undermine short-sellers who had bet against Tesla's stock.

Ross Gerber, chief executive of investment management firm Gerber Kawasaki, said: “The government will try to prove Elon Musk never wanted to go private and it was a fraud.

“That seems like a very steep hill to climb – I get SEC and a fine.”

In another blow for Tesla, Saudi Arabia's sovereign wealth fund, which has built a $2bn stake in the company, invested $1bn into electric car rival Lucid Motors.

The move will enable Lucid to start producing its first model in 2020.

One of Tesla's biggest bulls, Nomura Instinet analyst Romit Shah, downgraded the company from buy last week and said it was “no longer investable”, citing the “erratic behaviour” of Musk.

The colourful billionaire has also been sued by British diver Vernon Unsworth after a bizarre outburst, again on Twitter, in which Musk called Unsworth a paedophile. He also came under fire for smoking cannabis on comedian Joe Rogan's podcast, in what has been a tumultuous month.

Read more: 'It's legal, right?' Elon Musk smokes weed on podcast

A series of high-profile departures, including that of chief accounting officer Dave Morton after just a month in the job, and HR executive Gaby Toledano have also rocked the company in recent weeks.

In a statement, Tesla said: “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 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.”

The Justice Department said it would not confirm, deny or otherwise comment on the existence of an investigation.