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Investors sue Tesla's Musk over go-private tweets

New York

TWO investors filed suit against Tesla CEO Elon Musk and the electric car company after he tweeted that he wanted to take the firm private, causing the share price to inflate and shortselling investors to lose millions.

On Tuesday, Mr Musk said he could finance the buyout of Tesla, founded in 2003, at a large premium to current valuation, at a price of US$420 a share.

As a result, Tesla shares jumped 11 per cent, causing so-called shortsellers who have been betting on the stock crashing for years to lose millions.

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Shortselling involves borrowing overpriced shares in the belief that their price will decline, so that they can be sold and then bought back at a lower price.

Mr Musk, often the centre of controversy, did not prove he had the funds to finance the operation - despite tweeting "funding secured".

Kalman Isaacs, one of the investors who filed suit on Friday in a San Francisco court, claimed that Mr Musk's tweets were "designed to completely decimate shortsellers". He said he had to buy around 3,000 Tesla shares on Wednesday, the day after Mr Musk's tweets, to limit his losses.

William Chamberlain, another investor, also filed suit with accusations of artificial inflation. He said that Mr Musk and Tesla "artificially drove the price of Tesla shares up as much as US$45.47 from their August 6, 2018 closing price" of US$341.99.

The US Securities and Exchange Commission (SEC) regulator contacted Tesla to inquire whether Mr Musk's statements were factual and why the disclosure was made on Twitter rather than in a regulatory filing, according to media reports.

Mr Musk has done little to hide his disdain towards financial speculators, whom he regularly mocks on his Twitter account. AFP