Business

Lawsuits accuse Tesla’s Musk of fraud

Tesla CEO stunned investors by announcing to make Tesla private.

New York: Tesla Inc and Chief Executive Elon Musk were sued twice by investors who said they fraudulently engineered a scheme to squeeze short-sellers, including through Musk’s proposal to take the electric car company private.

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.”

In one of the lawsuits, the plaintiff Kalman Isaacs said Musk’s tweets were false and misleading, and together with Tesla’s failure to correct them amounted to a “nuclear attack” designed to “completely decimate” short-sellers.

The lawsuits filed by Isaacs and William Chamberlain said Musk’s and Tesla’s conduct artificially inflated Tesla’s stock price and violated federal securities laws.

In the dock

  • Musk has not offered evidence that he has lined up the necessary funding to take Tesla private, and the complaints did not offer proof to the contrary.
  • 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.
  • Tesla’s market value exceeds $60 billion, and its shares closed up $3.04 at $355.49.

(With inputs from Reuters)

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