Tesla CEO Musk accused in lawsuit of defrauding shareholders

14 August, 2018, 18:38 | Author: Teresa Adams
  • Tesla's board might not know where Elon's 'secure' funding is coming from

Tesla Inc and Chief Executive Elon Musk were sued on Friday by an investor who said they committed securities fraud in a scheme to "completely decimate" short-sellers that included Musk's proposal to take the electric vehicle company private.

Tesla did not respond to a request for comment on the proposed class-action complaints filed in the federal court in San Francisco. "Funding Secured." The stock initially shot up 11 per cent to nearly US$380. Then it fell back, losing about 7% over two days, as doubts mounted about the feasibility of the going-private idea -and about Musk's declaration that funding was already in place. "Funding Secured", he wrote. In reaction to Musk's Tweet, the price of Tesla's stock soared to an intra-day high of $387.46, $45.47 above the previous day's closing price, closing at $379.57 per share. "Obviously, all purchasers of Tesla securities were injured as well".

If Elon Musk fails to produce a credible plan to take the company private, Tesla's shares are likely to sink.

Elon Musk has a twenty percent stake of Tesla and he is the largest shareholder.

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Mr Isaacs and the second plaintiff, William Chamberlain, have alleged that Tesla's stock price was artificially inflated and federal securities laws had been breached. Others, however, stayed silent as they have yet to see more detailed financial evidence from Musk. After adjusting for inflation, that's more than the record-setting buyout of RJR Nabisco that closed in 1989.

Short-sellers racked up paper losses of $1.3 billion on Tuesday after Tesla shares rallied 11 percent.

"Shareholders could potentially be misled if the statement omits material information". "The market reaction shows Musk's statement by itself was material".

Here are some of the key events in Tesla Inc's turbulent history as a public company.

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The briefs battle royale began after Einhorn's hedge fund said in a letter he was "happy that his Model S lease ended" and was replacing the auto because of problems with the technology.

Irons has a small position in out-of-the money put options on Tesla that make money if the stock declines.

The case is Isaacs v Musk et al, U.S. District Court, Northern District of California, No. 18-04865.

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