JPMorgan asks SEC to fine Tesla $162 million

Breaking down the most recent round of Tesla buyout talk. JPMorgan is asking the Securities and Exchange Commission to fine Elon Musk’s Tesla Inc. $162 million for the time it took to confirm a…

JPMorgan asks SEC to fine Tesla $162 million

Breaking down the most recent round of Tesla buyout talk.

JPMorgan is asking the Securities and Exchange Commission to fine Elon Musk’s Tesla Inc. $162 million for the time it took to confirm a tweet by the billionaire chief executive’s about plans to take the company private.

The SEC on Wednesday said in a filing that Tesla and Musk have been reviewing the tweet, which Musk sent from his personal Twitter account on Aug. 7 at about 2:30 p.m. That evening, Tesla disclosed he had made a “verbal proposal” for a private company to buy the automaker for $420 a share, far above the stock’s closing price of $376.23 on Tuesday.

Tesla has been barred from selling shares in the U.S. for many years, and even with a potential buyout, would almost certainly have to remain a public company.

In the Aug. 7 tweet, Musk told his nearly 3 million followers, “funding secured.”

But the following morning, after the news was out, Tesla still was not sure if he was serious.

“On August 8, Musk reached out to several members of our investment banking team, including Thomas Ellman, a Senior Managing Director and the head of Investment Banking Services for Industrial and Financial Services,” according to a letter to the SEC from JPMorgan. “Mr. Ellman had seen the news coverage about Tesla, and he sought to confirm with Mr. Musk whether his comments were accurate.”

In the letter, JPMorgan’s legal department explained that the delay in accepting the tweet, the bank’s demand for verification and the “optimal time” for allowing a denial to bylaw committee to consider the issue all were steps that “raise additional concerns about Tesla’s internal controls and processes.”

It called Tesla’s reversal “more than apparent” to the firm because investors have a right to be notified when a CEO is departing.

“By not making immediate disclosure of the comment, Tesla violated” its own policies and securities laws, JPMorgan lawyers wrote.

The bank said the SEC should find that Tesla acted “willfully and knowing that such conduct would cause harm to a public company’s investors.”

JPMorgan contends that Tesla should have stepped up the process it takes to verify the veracity of insider information “on a timely basis,” which it takes public in regulatory filings.

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