Published: Mon, August 13, 2018
Money | By Armando Alvarado

Lawsuits accuse Tesla's Musk of fraud over tweets, going-private proposal

Lawsuits accuse Tesla's Musk of fraud over tweets, going-private proposal

An investor is suing Tesla and its founder over wild share price swings following Elon Musk's tweet claiming he was considering taking the company private. But a new report suggests that the question of funding might still be that - a question.

It said this occurred largely through a series of tweets by Musk on August 7, including when he said he might take Tesla private and that there was "funding secured". "Funding Secured." The stock initially shot up 11 per cent to nearly $380.

The proposed class-action complaint filed by Kalman Isaacs in San Francisco federal court accused Tesla and Musk of trying to artificially manipulate the company's stock price. Jalopnik published a roundup of all the attempts to find the source of this financing - Bloomberg called more than 12 firms, all of which denied knowledge, and The New York Times couldn't get answers from some of Tesla's biggest current investors.

But Isaacs said Tesla's and Musk's conduct caused the volatility that cost short-sellers hundreds of millions of dollars from having to cover their short positions, and caused all Tesla securities purchasers to pay inflated prices. Musk is Tesla's largest shareholder, with a 20 per cent stake in the company.

Other investors have begun to file lawsuits as well.

NASA postpones launch of first solar probe until Sunday
The probe will be 3.9 million miles from the sun's surface, making it the closest spacecraft to the sun's surface in history. Unfortunately, we didn't have enough time this evening to go troubleshoot that and try again for a launch.

After the tweet, Tesla's stock rose enough for Musk's net worth to grow by $1.4 billion (according to Hypebeast). Year-to-date, Tesla short interest is now up 14 percent overall.

"Shareholders could potentially be misled if the statement omits material information", attorney Joe Tabacco said.

The worst affected segment appears to be the short-sellers in the market who sell high and do the repurchase later. "The market reaction shows Musk's statement by itself was material". Tesla is the most shorted company on Wall Street, and Musk has been very vocal about his displeasure with short sellers.

"Short shorts coming soon to Tesla merch", Musk tweeted. He also said he had secured funding for the proposal, without providing details.

The cases are Isaacs v Musk et al, U.S. District Court, Northern District of California, No. 18-04865; and Chamberlain v Tesla Inc et al in the same court, No. 18-04876.

Like this: