8/13/2018

Lawsuits Claim Tesla CEO of Fraud in Buyout Tweets

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Two investor lawsuits filed on Friday claim Tesla Inc. CEO Elon Musk made false and misleading statements about taking the company private in a deliberate effort to hurt short-sellers.

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Two investor lawsuits filed on Friday claim Tesla Inc. CEO Elon Musk made false and misleading statements about taking the company private in a deliberate effort to hurt short-sellers.

Last Tuesday Musk announced in a nine-word tweet that funding had been secured in a $72 billion plan to delist Tesla that valued the company’s stock at $420 per share. The statement prompted a brief 11% jump in Tesla’s share price to $380. The stock closed at $355 on Friday.

Short-sellers seek to make a profit by buying a company’s shares, then immediately selling them with a promise to reacquire the shares later at what they bet will be a lower price. The complaints allege that Musk artificially inflated Tesla’s share price in violation of U.S. securities laws. Musk has frequently clashed with short-sellers.

The lawsuits complain the short-sellers had to spend hundreds of millions of dollars to cover their short positions after Musk’s announcement.