Elon Musk sued over proposal to take Tesla private

12 August, 2018, 18:25 | Author: Billie Castillo
  • Elon Musk

He said he had to buy around 3,000 Tesla shares on Wednesday, the day after Musk's tweets, to limit his losses.

Tesla Inc and its CEO Elon Musk were sued on Friday by an investor who said they defrauded shareholders in a scheme to manipulate the electric auto company's stock price, starting with Musk's August 7 tweet that he might take Tesla private.

Shorting a stock can temporarily lower its price, making short investors a frequent target of CEO wrath.

The US Securities and Exchange Commission is understood to have already opened an inquiry into Mr Musk's tweets.

The lawsuits were filed three days after Musk stunned investors by announcing on Twitter that he might take Tesla private in a record $72 billion transaction that valued the company at $420 per share, and that "funding" had been "secured".

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Chamberlain said Musk and Tesla "artificially drove the price of Tesla shares up as much as $45.47 from their August 6, 2018 closing price ($341.99)".

If his motive for the tweet "was frustration with short sellers, then that could be a case of market manipulation", John Coffee Jr., a Columbia University law professor and corporate-governance expert, said earlier this week. Another, filed by William Chamberlain, seeks class action for those who bought or sold Tesla stock between August 7 and 10.

"Short shorts coming soon to Tesla merch", Musk tweeted.

Both lawsuits accused Musk or Tesla of harming short sellers with false information.

Musk also said, with characteristic Kanye West arrogance, that the Tesla stock is "the most shorted stock in the history of the stock market" and that, as it is publicly traded, "there are large numbers of people who have the incentive to attack the company". So, even if Musk did post the tweet hoping to damage short sellers by boosting Tesla stock price, it wouldn't be illegal unless it were untrue, she said. His Twitter comments do not have any details or evidence of such a financial arrangement.

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