Tesla stock prices fell sharply on Tuesday, after Bloomberg News broke a story claiming that the Department of Justice was considering legal action in relation to CEO Elon Musk’s August tweets.

Last month, the outspoken CEO said in a tweet that he was considering taking the electric car manufacturer off the public market, with an option for shareholders to stay on board as private investors.

Musk told investors on twitter that he was “considering taking Tesla private at $420. Funding secured.”

The tweets set off a frenzy of market activity, with investors flocking towards the stock with the prospect of one of the largest buyouts in history. It was later revealed that Musk would not take the company private, with the CEO citing a general lack of investor support for the move. It was also revealed that funding for the buyout had not been secured, despite Musk stating otherwise in his tweets.

Both the DOJ and SEC are Investigating the Tesla Electric Car Manufacturer

According to Bloomberg News, the Department of Justice is now investigating the tweets and whether Musk’s activity was unlawful. Federal prosecutors are likely to treat the investigation as a fraud case if it proceeds beyond the initial stages.

Tesla confirmed in a statement that the Department of Justice had approached the company in relation to the investigation. A spokesperson said that “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.” However, the spokesperson noted that “We have not received a subpoena, a request for testimony, or any other formal process. The matter should be quickly resolved.”

The Securities and Exchange Commission is running its own fraud investigation to determine whether Musk’s initial tweets were truthful.

Investors May be Split on Government Intervention

Long term investors in Tesla will likely want to put the whole debacle behind them. Continued bad press coverage and the threat of legal action is tanking Tesla stocks, with 5% lost on Tuesday alone.

However, short sellers, who rely on falling stock prices and who were enraged by Musk’s seemingly careless tweets, will likely be more than happy for the government to step in with a legal investigation.

There is a growing group of investors who don’t have confidence in Elon Musk, seeing him as a brash and unstable leader for the company. Tesla has almost unlimited potential in the electric car market, but continued missteps and poor communication with the public are hurting the company image and are now clearly starting to erode investor confidence.