Sunday, 21 October, 2018

Elon Musk sued over proposal to take Tesla private

Elon Musk CNBC reports Musk has been asked to recuse himself from discussions about the company going private
Ginger Lawrence | 12 August, 2018, 04:37

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" created to "completely decimate" short-sellers.

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.

Isaacs claims that Tesla's volatility on Wall Street after the Twitter storm has cost shareholders shorting the stock hundreds of millions of dollars, and caused all Tesla securities purchasers to pay inflated prices over the three-day period leading up to Friday 10 August.

The two lawsuits filed by Isaacs and William Chamberlain on Friday alleged that Musk and Tesla's behaviour following the tweets violated USA securities law, and artificially inflated the company's share price.

The class includes investors who bought Tesla shares as they were rising in the wake of Musk's tweet.

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The stock has since retreated, in part following reports that the U.S. Securities and Exchange Commission had begun inquiring about Musk's activity. So, even if Musk did post the tweet hoping to damage short sellers by boosting Tesla stock price, it wouldn't be illegal unless it were untrue, she said.

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

Tesla's share price edged higher as markets closed late last night, increasing 0.86 per cent to $355.49.

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.

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.