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

04:35  11 august  2018
04:35  11 august  2018 Source:   reuters.com

Elon Musk sued over tweets, proposal to take Tesla private

  Elon Musk sued over tweets, proposal to take Tesla private Tesla Inc. and its chief executive Elon Musk were sued twice on Friday by investors who said they fraudulently engineered a scheme to squeeze short-sellers, including through Musk's proposal to take the electric car company private. 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 US transaction that valued the company at $420 per share, and that "funding" had been "secured.

7 about a possible going - private transaction, and Tesla ' s failure to correct them, were a "nuclear attack" on short-sellers that inflated Tesla ' s stock price and violated federal securities laws. Musk had tweeted that Tesla could go private for US0 per share.

Questions remain over whether the Tesla chief executive broke SEC guidelines by tweeting the news on Tuesday. If the content of Musk ’s tweet was not true, lawyers argue, it could expose Tesla ’ s mercurial chief executive officer and the company to regulatory action and private lawsuits .

Elon Musk wearing a suit and tie: Elon Musk, founder, CEO and lead designer at SpaceX and co-founder of Tesla, speaks at the International Space Station Research and Development Conference in Washington.© REUTERS/Aaron P. Bernstein/File Photo Elon Musk, founder, CEO and lead designer at SpaceX and co-founder of Tesla, speaks at the International Space Station Research and Development Conference in Washington.

Tesla Inc and Chief Executive Elon Musk were sued twice on Friday by investors who said they fraudulently engineered a scheme to squeeze short-sellers, including through Musk's proposal to take the electric car company private.

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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."

Tesla CEO Musk taunts short sellers amid legal scrutiny

  Tesla CEO Musk taunts short sellers amid legal scrutiny Tesla CEO Musk taunts short sellers amid legal scrutinyThe tweets are aimed at "shorts," or investors who borrowed shares of Tesla and immediately sold them with the hope that Tesla's share price would fall. That would allow the shorts to buy back the stock at a lower price, return the shares to the lender, and pocket the difference.

A new lawsuit accuses Tesla CEO Elon Musk and the electric car company of securities fraud . Isaacs alleged securities fraud against Tesla and Musk , who on Tuesday tweeted that he was “considering taking Tesla private at 0” and that funding was secured.

Mr. Musk ’ s “ tweets seem cryptic at best, and it is hard to see how he has complied with his duty to not be misleadingly incomplete.” Elon Musk Says Tesla May Go Private , and Its Stock Soars.

In one of the lawsuits, the plaintiff Kalman Isaacs said Musk's tweets were false and misleading, and together with Tesla's failure to correct them amounted to a "nuclear attack" designed to "completely decimate" short-sellers.

The lawsuits filed by Isaacs and William Chamberlain said Musk's and Tesla's conduct artificially inflated Tesla's stock price and violated federal securities laws.

Tesla did not respond to a request for comment on the proposed class-action complaints filed in the federal court in San Francisco. The company is based in nearby Palo Alto, California.

Short-sellers borrow shares they believe are overpriced, sell them, and then repurchase shares later at what they hope will be a lower price to make a profit.

Tesla forms committee to assess proposal to go private

  Tesla forms committee to assess proposal to go private Tesla is forming a special committee to evaluate proposals to take the company private one week after CEO Elon Musk said he was considering it. The committee, made up of three independent directors, said Tuesday that it has not received any formal proposal from Musk, who on Aug. 7 tweeted that he had "funding secured" to buy Tesla shares at $420 per share.

Musk had tweeted that Tesla could go private for 0 per share. According to the complaint, Isaacs bought 3,000 Tesla shares on Aug. 8 to cover his short position. The proposed class period in Isaacs' s lawsuit runs from the afternoon of Aug.

Mr. Musk ’ s “ tweets seem cryptic at best, and it is hard to see how he has complied with his duty to not be misleadingly incomplete.” Elon Musk Says Tesla May Go Private , and Its Stock Soars.

Such investors have long been an irritant for Musk, who has sometimes used Twitter to criticize them.

Musk's Aug. 7 tweets helped push Tesla's stock price more than 13 percent above the prior day's close.

The stock has since given back more than two-thirds of that gain, in part following reports that the U.S. Securities and Exchange Commission had begun inquiring about Musk's activity.

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.

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.

Tesla's market value exceeds $60 billion, and its shares closed Friday up $3.04 at $355.49.

According to his complaint, Isaacs bought 3,000 Tesla shares on Aug. 8 to cover his short position.

The proposed class period in Isaacs' lawsuit runs from the afternoon of Aug. 7 through the next day, and in Chamberlain's lawsuit runs from Aug. 7 to Aug. 10.

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.

(Reporting by Jonathan Stempel in New York; Additional reporting by Peter Henderson in San Francisco; Editing by Rosalba O'Brien, Toni Reinhold)

Tesla shares fall 5% on Wall St. skepticism, SEC probe reports .
Tesla Inc.'s shares slipped almost five per cent to a two-day low on Thursday, wiping out all the gains fueled by chief executive Elon Musk's recent tweet announcing a plan to take the company private. Shares fell early in the day following Wall Street's skeptical response to Musk's idea of going private and a Wall Street Journal report on Wednesday that the U.S. Securities and Exchange Commission was asking Tesla why Musk announced his plans on Twitter and whether his statement was truthful.

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