Elon Musk, Tesla’s (NASDAQ:TSLA) CEO Tried to ‘Burn’ Short-Sellers
Tesla, Inc. (NASDAQ:TSLA) and CECO Elon Musk has been sued by noted short-seller Andrew Left, who alleges Mr. Musk fraudulently engineered his since-abandoned plan to take Tesla private to “burn” stock investors who bet the EV company’s shares would plunge.
Mr. Left, who runs Citron Research, said in his proposed class-action complaint Thursday that Mr. Musk’s issuance of materially false and misleading information harmed short-sellers as well as those hoping Tesla’s stock price would rise.
The shareholder lawsuit is one of at least 7 targeting Mr. Musk since he stunned investors by Tweeting on 7 August saying he might take Tesla private in a $72-B transaction valuing the company at 420/share, and that “funding” had been “secured.”
Then Mr. Musk announced on 24 August that Tesla would remain public.
Tesla did not immediately respond to requests for comment on Mr. Left’s lawsuit, which was filed in San Francisco federal court.
Note: Short-sellers borrow shares they believe are overpriced, sell them, and then repurchase shares later at what they hope will be lower prices to make a profit.
Mr. Musk has long used Twitter to criticize short-sellers, and Mr. Left said his conduct violated federal securities laws.
“Defendant Musk artificially manipulated the price of Tesla securities with objectively false Tweets in order to ‘burn’ the company’s short-sellers,” Mr. Left said.
“In the succeeding days, the truth regarding the supposedly ‘secure’ financing needed to effectuate the going-private transaction began to emerge, exposing the fraudulent scheme,” he added.
The proposed class period runs from 7 -17 August over which time Mr. Left said he bought and sold millions of dollars of Tesla shares.
That period ended after the NY-T’s published an interview in which Mr. Musk, who owns about 20% of Tesla, described the severe stress he faced running the company.
Finally, on the evening of Friday, 24 August, Mr. Musk, by then facing US Securities and Exchange Commission scrutiny into the factual accuracy of the “secured” Tweet, Mr. Musk blogged https://www.tesla.com/blog/staying-public%20 that Tesla would remain public, citing investor resistance.
“The sentiment, in a nutshell, was ‘please don’t do this,'” he wrote.
Tesla shares have lost more than 25% of their value since reaching an intra-day high of 387.46 on 7 August 2018.
The case is Left v Tesla Inc et al, U.S. District Court, Northern District of California, No. 18-05463.
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