Legal

Tesla, Elon Musk Sued Over Go-Private Tweets

Tesla and its chief executive Elon Musk have been hit with two lawsuits by investors who are accusing Musk and his company of fraud.

According to Reuters, the lawsuits were filed on Friday (August 10), three days after Musk announced on Twitter that was considering taking Tesla private in a $72 billion transaction that valued the company at $420 per share. He even added that “funding” had been “secured,” although he offered no evidence to back this claim up.

In one lawsuit, plaintiff Kalman Isaacs said Musk’s tweets were false and misleading, and along with Tesla’s failure to correct them, amounted to a “nuclear attack” designed to “completely decimate” short-sellers.

Short-sellers, who borrow shares they believe are overpriced, sell them, and then repurchase them at what they hope will be a lower price to make a profit, have been criticized by Musk on Twitter in the past.

The lawsuits filed by Isaacs and William Chamberlain also allege that Musk’s and Tesla’s actions wrongfully inflated Tesla’s stock price and violated federal securities laws.

Musk’s tweets sent Tesla’s stock price soaring more than 13 percent. The stock has given back more than two-thirds of that gain after it was reported that the U.S. Securities and Exchange Commission was looking into Musk’s activity.

Isaacs said Tesla’s and Musk’s conduct cost short-sellers hundreds of millions of dollars, adding that he purchased 3,000 Tesla shares on August 8 to cover his short position.

These lawsuits are more bad news for Tesla. Last month, it was reported that the company was seeking partial refunds from suppliers it had already paid in an effort to become profitable more quickly. A memo described the cash back as key to the company’s ability to continue operating, and described the refunds as an investment in Tesla that supports continued growth between buyer and supplier.

“It’s simply ludicrous and it just shows that Tesla is desperate right now,” said manufacturing consultant Dennis Virag. “They’re worried about their profitability, but they don’t care about their suppliers’ profitability.”

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