Economy

Tesla CEO Musk accused of defrauding shareholders, sued by investors

Tesla CEO Musk accused of defrauding shareholders, sued by investors

Tesla and its billionaire chief Elon Musk were hit by two new lawsuits yesterday, over claims that Musk's surprise proposal to take the company private was scheme created to target short-sellers of Tesla stock.

One lawsuit, filed by Tesla investor Kalman Isaacs, said Musk's tweets amounted to a "nuclear attack" on short-sellers, created to "completely decimate" them for not believing in Tesla's stock to date. This was the message given by Musk in his tweet, some three days earlier and what's more, he said the funds required to go through with that exercise, $72 billion, have also been tied up.

"Am considering taking Tesla private at $420".

The complaint alleges violations of USA securities law and was filed Friday as a class action in federal court in San Francisco.

The two separate cases have been filed in a court in the Northern District of California, which is not far from where Tesla is located, Palo Alto.

The class includes investors who bought Tesla shares as they were rising in the wake of Musk's tweet.

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Short-sellers make a profit by borrowing overpriced shares, selling them and then buying them back at what they hope will be a lower price.

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)".

Musk has not offered evidence that he has lined up the necessary funding to take Tesla private, and the complaints did not offer proof to the contrary.

The US Securities and Exchange Commission (SEC) regulator contacted Tesla to inquire whether Musk's statements were factual and why the disclosure was made on Twitter rather than in a regulatory filing, according to media reports.

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.