Investors sue Tesla’s Musk over go-private tweets
NEW YORK Two investors have filed a suit against Tesla CEO Elon Musk and the electric car company after he tweeted he wanted to take the firm private, causing the share price to inflate and short-selling investors to lose millions.
On Tuesday, Mr Musk said he could finance the buyout of Tesla, founded in 2003, at a large premium to current valuation, at a price of $420 a share.
As a result, Tesla shares jumped 11 per cent, causing so-called short-sellers who have been betting on the stock crashing for years to lose millions.
Short-selling involves borrowing overpriced shares in the belief that their price will decline, so they can be sold and bought back at a lower price. Mr Musk did not prove he had the funds to finance the operation - despite tweeting "funding secured".
Mr Kalman Isaacs, one of the investors who filed the suit on Friday in a San Francisco court, claimed Mr Musk's tweets were "designed to completely decimate short-sellers".
He said he had to buy around 3,000 Tesla shares on Wednesday, the day after Mr Musk's tweets, to limit his losses.
Another investor, Mr William Chamberlain, also filed a suit with accusations of artificial inflation.
He said Mr 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)."
The US Securities and Exchange Commission contacted Tesla to inquire whether Mr Musk's statements were factual and why the disclosure was made on Twitter rather than in a regulatory filing, according to media reports.- AFP