Published: Wed, August 15, 2018
Finance | By Kristine Clayton

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

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

And it is unlikely a Wall Street firm would risk backing Tesla, which is burning through about $1 billion a quarter and has not had a single profitable year in its 15 years of existence, said another.

Tesla Inc and Chief Executive Elon Musk were sued on Friday by an investor who said they committed securities fraud in a scheme to "completely decimate" short-sellers that included Musk's proposal to take the electric vehicle company private.

The share fall has been fueled by investor skepticism over the deal's prospects and media reports that US regulators are asking Tesla why Musk announced his plans on Twitter and whether his statement was truthful. After Musk's tweet, Tesla shares rose, and Isaacs was frantic. If it's accurate, the report highlights that Musk's initial description of the plan which mentioned that the funding had been secured wasn't exactly true.

Tesla has yet to comment on the lawsuits.

Discussions over taking Tesla private have failed before. In a letter to clients dated July 31, Einhorn said he was happy his Tesla lease had ended, citing issues with the car's touch screen and power windows.

Musk has also said he would be looking to keep his ownership of Tesla at around 20 per cent in a buyout deal, and that a special goal vehicle, like the one that exists at his aerospace company SpaceX, would allow Tesla shareholders to remain invested if they so choose.

"'Funding secured' is a very strong term, and it has legal consequences", Pitt said.

Musk's August 7 tweets helped push Tesla's stock price more than 13 percent above the prior day's close. The agency would also look at the veracity of the statement Tesla later posted on its website and whether the company should have made additional statements based on what it knew.

Musk's attitude toward short sellers could be relevant, securities law experts have said.

"Musk has every right to say that he has a potential $420-per-share takeover bid lined up, provided that he doesn't sell stock into the hype", Cramer said this week. And ultimately, any punishment Musk or Tesla would receive would depend on the amount and strength of evidence the SEC found.

Kalman Isaacs, one of the investors who filed suit Friday in a San Francisco court, claimed Musk's tweets were "designed to completely decimate short-sellers".

Whether or not Musk's actions lead to an SEC investigation, his conduct this week has been highly unusual, putting Tesla and its shareholders in an increasingly hard position.

Elon Musk wasn't joking.

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