Tesla (NASDAQ:TSLA) Sued for “Pump & Dump” Securities Fraud
Tesla (NASDAQ:TSLA) has petitioned a federal court in San Francisco to dismiss a securities fraud lawsuit filed by shareholders, which accuses the automaker of lying about its ability to mass produce the Model 3 sedan.
The lawsuit, filed in October, alleges that Tesla released false statements when it announced that the vehicle’s production was on track in May and August last year.
Its says those statements and the lack of disclosure that Tesla was “woefully unprepared” to mass produce the vehicle misled investors into snapping up “artificially inflated” shares, aka Pump & Dump.
In a court filing asking for the dismissal, Tesla has denied that it intended to mislead anyone and said that it and used frank and plain language to discuss the “Production Hell” it went through since the start and is still burning.
When it CEO Elon Musk announced that the M-3’s production was on track last year, Tesla said the issues that caused its backlog hadn’t cropped up yet.
It admitted late last year that it was experiencing production bottlenecks mainly due to battery module assembly problems in its Gigafactory facility.
And company’s CEO, Elon Musk, also revealed in an interview that using too many robots for production did more harm than good.
Tesla has not have emerged out of it all unscathed.
Earlier this month, the company reported that it able to build about 2,000 cars per week now, and it is aiming to starting manufacturing 5,000 cars per week in 2 months’ time, still that is tiny for a company that has a back log of several hundred deposited orders for the ‘affordable’ EV, that has been repriced to $78-K.
In addition to its EV production problems…
Tesla wrote in the court filing that its $4-B investment in Model 3, Gigafactory’s development Nevada and all the equipment it commissioned for the project show its “good faith belief” in the vehicle.
Whether those are enough to convince the court to throw the case out remains to be seen for now. The lawsuit is seeking class action status for shareholders who bought Tesla stocks from 4 May 2016 to 6 October 2017.
A hearing is scheduled to take place sometime in August.
The Big Q: When will the SEC and DOJ step in on this case.
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