Economy, Auto

Musk, Tesla Sued Over Controversial Tweet

Musk, Tesla Sued Over Controversial Tweet
Musk, Tesla Sued Over Controversial Tweet

Elon Musk and Tesla Inc. were sued for manipulating share prices with the chief executive officer’s bombshell tweet that he was thinking about taking the company private and that funding was secure.

Musk lied about funding so he could push shares higher and ambush short sellers betting against the company, according to the shareholder complaint, which was filed Friday as a securities-fraud class action in federal court in San Francisco, Bloomberg reported.

Musk set off a firestorm with the 53-character post August 7 on Twitter: “Am considering taking Tesla private at $420. Funding Secured.” The stock initially shot up 11% to almost $380. Then it fell back, losing about 7% over two days, as doubts mounted about the feasibility of the going-private idea—and about Musk’s declaration that funding was already in place. Neither he nor anyone else has supplied evidence that it was.

“Musk’s statement that he had secured funding was especially material and significantly moved the market,” shareholder Kalman Isaacs said in the complaint. “Because Musk has not secured financing, and has issued false and materially misleading information into the market, short sellers of Tesla stock were forced to cover their positions by purchasing shares at artificially inflated prices after 12:48 p.m. on August 7, 2018. Obviously, all purchasers of Tesla securities were injured as well.”

Tesla declined to comment on the suit. Musk is Tesla’s largest shareholder, with a 20% stake in the company.

The US Securities and Exchange Commission is examining whether Musk’s “funding secured” tweet was meant to be factual, intensifying its scrutiny of Tesla’s public statements after the announcement, according to people familiar with the matter.

SEC enforcement attorneys in the San Francisco office were already gathering general information about Tesla’s public pronouncements on manufacturing goals and sales targets, according to the people who asked not to be named because the review is private. Other investors have begun to file lawsuits as well. Eventually, the cases will be consolidated and go before a single judge.

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