Published: Sun, August 12, 2018
Business | By Eloise Houston

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

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

Two class actions suits have been filed against Elon Musk, the Founder and CEO of electric auto manufacturing company, Tesla Inc and the company itself.

When Elon Musk took to Twitter earlier this week and said he was considering taking the company private again, and that he had "secured" funding, that sounded pretty ironclad.

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

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. 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 share price later fell.

After the tweet, Tesla's stock rose enough for Musk's net worth to grow by $1.4 billion (according to Hypebeast).

The stock has since retreated, in part following reports that the U.S. Securities and Exchange Commission had begun inquiring about Musk's activity.

The Wall Street regulator is reported to have asked Tesla why plans to go private were disclosed on the social media platform rather than in an official filing.

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 did not respond to a request for comment.

One of the lawsuits, filed by shareholderKalman Isaacs, seeks class action status on behalf of investors who bought Tesla stock on August 7 and August 8.

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