Federal securities regulators have issued subpoenas regarding Tesla’s public assurances over the production of its newest car, the company said Friday, the latest signal of an increasingly aggressive investigation into Elon Musk’s electric automaker.
The notice, tucked inside a 141-page quarterly report Tesla filed with the Securities and Exchange Commission on Friday, confirms that the SEC has issued subpoenas as part of a deepening probe into the company’s manufacturing projections for its Model 3 sedan last year. Those numbers were widely regarded as a make-or-break issue for Tesla as it sought to navigate factory chaos, slow its cash burn and prove to investors that it could survive.
The Justice Department has also requested documents as part of a similar investigation, but those investigators have not issued subpoenas or made other formal requests, Tesla said in a statement Friday. Tesla’s SEC filing said that an enforcement action from either agency could damage its business, cash flow and future prospects.
Tesla and Musk, its billionaire chief executive, have pushed back strongly against a Wall Street Journal report last week that the FBI was pursuing a deepening criminal investigation into Tesla. In an interview with the tech outlet Recode released Friday morning, Musk called the report “utterly false,” “absurd” and written by journalists who are “terrible people.”
The FBI and the SEC declined to comment on the matter.
News of the SEC’s subpoenas comes a few weeks after Musk settled with the agency on a second investigation into his claims on Twitter that he would take Tesla private. The tweet, which Musk later said was a joke, caused the company stock to fall 14 percent. The SEC charged in a lawsuit that Musk had misled investors, and Tesla and Musk agreed last month to each pay $20 million and have Musk step down as chairman of the board.
The expanding SEC probe could set up a new hurdle for a company that last month said it had finally resurfaced into profitability, thanks to booming sales of the Model 3. Tesla said Friday that it expected to incur undisclosed costs related to responding to the subpoenas and potentially defending against any government action.
The $58 billion company agreed as part of the SEC settlement to more closely monitor Musk’s social-media commentary. But in the days after the settlement, Musk taunted the agency, tweeting, “Just want to that the Shortseller Enrichment Commission is doing incredible work."
The probe, led by SEC investigators in San Francisco, touches on questions that have been raised by Tesla investors and former employees into whether the company had truthfully conveyed its progress in producing its futuristic, battery-powered cars.
A former Tesla employee, Martin Tripp, sought whistleblower protection and filed SEC complaints claiming that Musk had overstated production numbers, which Tesla has disputed. Shareholders made similar claims in a securities-fraud lawsuit dismissed in August by a federal judge.
Unconventional factory methods and failed attempts at automation forced the Silicon Valley automaker to endure months of costly delays and executive departures at its car factory in Fremont, Calif., during a time that Musk has called “production hell.” The company said Friday that it expected to spend up to $6 billion on factories and equipment through 2020.
“When we started the Model 3 production ramp, we were transparent about how difficult it would be,” the company said in a statement. “While Tesla gets criticized when it is delayed in reaching a goal, it should not be forgotten that Tesla has achieved many goals that were doubted by most. We are enormously proud of the efforts of the whole company in making it through this difficult ramp and getting us to volume production.”
Musk put it a different way in his Recode interview: “It is absurd that Tesla is alive. Absurd! Absurd."
Matt Zapotosky contributed to this report.