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

Enlarge  Musk

Enlarge Musk

Tesla declined to comment on the suit.

Two class actions suits have been filed against Elon Musk, the Founder and CEO of electric vehicle manufacturing company, Tesla Inc and the company itself. One tweet on Tuesday said that funding to take Tesla private was "secure".

The two lawsuits filed by Isaacs and William Chamberlain on Friday alleged that Musk and Tesla's behaviour following the tweets violated U.S. securities law, and artificially inflated the company's share price. The company is based in nearby Palo Alto, California. Another, filed by William Chamberlain, seeks class action for those who bought or sold Tesla stock between August 7 and 10.

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.

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.

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

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But he added that the conduct of Tesla and its chief executive Mr Musk had caused volatility and cost short-sellers hundreds of millions of dollars.

No evidence has been presented by either side to prove or disprove that funding had been secured to take the company private.

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

"It is clear that Defendant Musk Tweeted materially false and misleading information regarding the Going Private Transaction to exact personal revenge and "squeeze-out" the short-sellers who had purportedly been badgering him for months", the complaint filed by Isaacs states.

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.

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