Tesla

Last week, Tesla was the top gainer among auto stocks with 12.1% gains. However, the stock turned negative today and erased most of these gains after a Bloomberg report suggested that TSLA is “under investigation by the Justice Department over public statements made by the company and Chief Executive Officer Elon Musk.” The report cited “two people familiar with the matter.”

Tesla Tanks on Reports of Justice Department’s Criminal Probe

Reports of DOJ probe

On August 7, CEO Elon Musk’s tweet about “taking Tesla private” triggered a price rally in the stock. However, these gains didn’t last for long, as analysts were skeptical about Musk’s claim of secured funding. On August 23, Musk again surprised investors by announcing that Tesla would stay public, as he found the process of going private “more time-consuming and distracting than initially anticipated.” The U.S. Securities and Exchange Commission’s investigation into this case is still going on.

Now, the involvement of the U.S. Department of Justice (or DOJ) in the case could increase troubles for Tesla as well as for Musk. If the SEC finds Musk and Tesla guilty of unlawful intent to mislead markets and investors, it could lead to criminal charges against Tesla and Musk and hurt investor sentiment.

Earlier this month, Musk was seen “smoking marijuana on a live web show with comedian Joe Rogan.” After this incident, Nomura Instinet analyst called Tesla stock “no longer investable.”

TSLA stock tanked today

At 1:25 PM EST, Tesla stock slightly recovered but was still down 3.1% from the previous day’s closing price after dropping by 7% earlier today. In contrast, General Motors (GM), Ford (F), and Fiat Chrysler (FCAU), other auto stocks (XLY), were trading with 0.45%, 0.4%, and 0.9% gains, respectively, at 1:25 PM EST.

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