Tesla and Elon Musk hit by fresh lawsuits over stock rigging claims

Ivan Schwartz
August 13, 2018

Tesla, Inc. (NASDAQ: TSLA) has been on the move this week, surging as high as $387.46 following a tweet by CEO Elon Musk that he had "funding secured" to take the company private at a price of $420 per share. But a new report suggests that the question of funding might still be that - a question. "Funding Secured." The stock initially shot up 11 per cent to nearly US$380.

Elon and Tesla could end up in some serious trouble if the buyout financing wasn't actually secure.

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.

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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Other investors have begun to file lawsuits as well.

The class includes investors who bought Tesla shares as they were rising in the wake of Musk's tweet. And he only owns 20 percent of the company!

"Shareholders could potentially be misled if the statement omits material information", attorney Joe Tabacco said. "Anybody who purchased the stock on that news, if the news was in fact misleading, could have a claim, however, it would be very short class period". "The market reaction shows Musk's statement by itself was material".

Musk has a history of setting aggressive sales targets that critics have called unrealistic. Musk and SoftBank Group's Masayoshi Son held talks past year that touched on taking Tesla private, two people with knowledge of the discussions have said. He also said he had secured funding for the proposal, without providing details.

The case is Isaacs v. Musk, 18-cv-04865, US District Court, Northern District of California (San Francisco).

Other reports by GizPress

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