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

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

Elon Musk and his electric auto firm Tesla are being sued by investors who accuse them of concocting a scheme to "completely decimate" short-sellers. "Funding Secured." The stock initially shot up 11 per cent to nearly US$380.

The lawsuits were filed three days after Musk stunned investors by announcing on Twitter that he might take Tesla private in a record $72 billion transaction that valued the company at $420 per share, and that "funding" had been "secured".

He then answered a number of questions from some of his 22.3 million followers, reiterating these points.

The complaint said the class period begins on the afternoon of August 7, when the defendants launched their "nuclear attack" on short-sellers, and ends the next day. That would allow the shorts to buy back the stock at a lower price, return the shares to the lender, and pocket the difference.

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.

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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.

Short sellers are investors who bet against a company and look for its stock price to go down.

But Isaacs said Tesla's and Musk's conduct caused the volatility that cost short-sellers hundreds of millions of dollars from having to cover their short positions, and caused all Tesla securities purchasers to pay inflated prices.

According to his complaint, Isaacs bought 3,000 Tesla shares on August 8 to cover his short position. Well, Tesla is now a publicly traded company and Mr. Musk doesn't like this because being public, as he puts it, "subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term".

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