Two investors filed suit against Tesla CEO Elon Musk and the electric auto company after he tweeted he wanted to take the firm private, causing the share price to inflate and short-selling investors to lose millions.
The decision to go private is mostly, based, Musk says, on the fact that his other company, SpaceX, is privately held and is operated more efficiently than Tesla, as it isn't subject to the ups and downs of the stock market. "Funding Secured", he wrote.
Kalman Isaacs, one of the investors who filed suit Friday in a San Francisco court, claimed Musk's tweets were "designed to completely decimate short-sellers".
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.
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Chamberlain said 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 is understood to have already opened an inquiry into Mr Musk's tweets.
Tesla's board has allegedly not yet received comprehensive information regarding the finances required to take the company private, Reuters reports, citing sources familiar with the matter.
Tesla's share price edged higher as markets closed late last night, increasing 0.86 per cent to $355.49.
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"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.
According to the complaint, Isaacs bought 3,000 Tesla shares on August 8 to cover his short position, or bet that the price would decline, in the company.
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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