JUSTICE DEPARTMENT LOOKING UNDER THE HOOD. In Musk We Trust? By Todd Horwitz, Bubba Trading

 

Tesla Inc. on Tuesday said the Justice Department has opened an investigation into the company following Chief Executive Elon Musk’s surprise tweet in August that he had secured funding to possibly take the electric-car maker private.

The company said that last month it received a “voluntary request for documents” from the Justice Department, generally the first step in a federal investigation of this kind. Tesla said it hasn’t received a subpoena, a request for testimony or any other formal request.

According to the Wall Street Journal, the SEC is also looking at whether Tesla misled about production problems with the Model 3. The model — marketed as an “affordable” Tesla electric car with a $35,000 initial price tag — has been plagued by logistical problems, with Tesla delivering just 2,700 cars last year — far less than the 200,000 Musk had earlier promised.

Shares of Tesla, which trade on the Nasdaq exchange under the ticker symbol TSLA, dropped 3.5 percent Tuesday, to around $285. The stock is down nearly 12 percent this year, buffeted by reports of production delays, erratic tweets and reports of Musk’s seemingly unstable personal life.

Despite Tuesday’s stock dive, some analysts are keeping a positive outlook on the company, betting that the damage could be contained to its CEO. “Based on the facts we have, we believe Musk will be liable for fines (not necessarily TSLA), although the details are still unclear,” wrote Ben Kallo, senior research analyst at Baird, in a client note.

But others reiterated doubts that the company — even if it succeeds in mass-marketing electric cars — could turn a profit on them. UBS recently lowered its price target on the company, calculating that the lowest-priced Model 3 would actually lose money as well as face increased competition from other electric-car makers.

Todd “Bubba” Horwitz

IN ASSOCIATION WITH

Financial Markets and Political Commentary

 

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About the author

Todd Horwitz - Author of “Average Joe Options“. Todd began his trading career in 1980 at the CBOE. He was one of the original traders in the OEX & helped start the SPX. He is a member the CME where he trades S&P futures as well as foreign currencies & is a regular contributor to CNBC, Bloomberg, BNN, Fox & many other major news networks.