Tesla CEO Musk accused of defrauding shareholders, sued by investors
Tesla CEO Musk accused of defrauding shareholders, sued by investors
The Tesla logo is seen outside of their showroom in Washington DC. Saul Loeb AFP Getty Images
13 August, 2018, 20:43
Two new lawsuits accuse Tesla and its CEO Elon Musk of violating federal securities law by allegedly making false statements to boost the company's stock 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. "Funding Secured." The stock initially shot up 11 per cent to nearly $380.
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". The main accusation against both is that they perpetrated a fraud on the shareholders of Tesla by misleading that the company is being turned into a privately held company.
The Public Investment Fund sees its investment in Tesla as a strategic way for the world's biggest crude producer to hedge against oil, the person said. "Obviously, all purchasers of Tesla securities were injured as well".
A Tesla sales and service center is shown in Costa Mesa, California, U.S. June 28, 2018.
Tesla shares rose 13% after the Tesla announcement but the company's stock has since given up two-thirds of that gain. After adjusting for inflation, that's more than the record-setting buyout of RJR Nabisco that closed in 1989. "It looks like the large short sellers are holding onto their positions", and increasing the positions at the stock's higher level, he said. Year-to-date, Tesla short interest is now up 14 percent overall.
But just because Musk may not be in legal trouble doesn't mean the market is buying his claims. Tesla is the most shorted company on Wall Street, and Musk has been very vocal about his displeasure with short sellers.
In a letter to employees on Tuesday, Musk suggested a choice for shareholders of selling their shares for $420 each or remaining investors in a private Tesla. He also said he had secured funding for the proposal, without providing details.
The case is Isaacs v Musk et al, U.S. District Court, Northern District of California, No. 18-04865.
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The Saudi fund hasn't made any firm decisions on whether to increase its stake, or by how much, but talks are ongoing, they said. Musk's August 7 tweets helped push Tesla's stock price more than 13 percent above the prior day's close.
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