Tesla and its CEO, Elon Musk, face a pair of class action lawsuits claiming the billionaire violated federal securities law through tweets suggesting a plan to go private.
On August 7, Musk published a tweet saying he is considering taking Tesla private in a proposal valuing the company at $420 a share. Musk also said funding for the deal had been secured.
According to a class action complaint filed in federal court in San Francisco by plaintiff Kalman Issacs, Tesla and Musk “embarked on a scheme and course of conduct to artificially manipulate the price of Tesla stock to completely decimate the Company’s short-sellers,” beginning with Musk’s August 7 tweet.
The complaint says the series of tweets about the proposal drove shares of Tesla up $45.47 above the previous day’s closing. The lawsuit also claims Musk falsely stated he had secured the necessary funding to take Tesla private.
In a separate class-action lawsuit also filed in federal court in San Francisco, plaintiff William Chamberlain claims Musk “materially misled investors” between August 7 and August 10 on plans to take Tesla private, including falsely claiming investor support for the proposal was confirmed, and that funding was secured.
Tesla could not be immediately reached for comment.
Meanwhile, Tesla and Musk could face an investigation from the Securities and Exchange Commission. According to The Wall Street Journal, the SEC has talked to Tesla about Musk’s tweet, as well as why he made the disclosure on Twitter.
This week, Tesla’s board of investors is reportedly planning to meet with financial advisors to explore a proposal to take the company private. CNBC reports the board will likely ask Musk to recuse himself.
Follow Brett Molina on Twitter: @brettmolina23.
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