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Elon Musk and Tesla sued over ‘fraudulent scheme’ to go private

Tesla and Elon Musk were sued twice on Friday by investors who say they fraudulently engineered a scheme to squeeze short-sellers, including through Musk’s proposal to take the electric car company private. The lawsuits were filed three days after Musk stunned investors by announcing on Twitter that he might take Tesla private in a record $72bn transaction that valued the company at $420 per share, and that “funding” had been “secured”.

In one of the lawsuits, the plaintiff Kalman Isaacs said Musk’s tweets were false and misleading, and together with Tesla’s failure to correct them amounted to a “nuclear attack” designed to “completely decimate” short-sellers. The lawsuits filed by Isaacs and William Chamberlain said Musk’s and Tesla’s conduct artificially inflated Tesla’s stock price and violated federal securities laws.

Short-sellers borrow shares they believe are overpriced, sell them, and then repurchase shares later at what they hope will be a lower price to make a profit. Such investors have long been an irritant for Musk, who has sometimes used Twitter to criticize them. Musk’s tweets on 7 August helped push Tesla’s stock price more than 13% above the prior day’s close.

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