Prominent short-seller Andrew Left launched a lawsuit against Tesla and its CEO, Elon Musk, alleging that Musk fraudulently engineered his since-abandoned plan to take the electric-car maker private in order to hurt investors betting against the stock.
Left, the founder of Citron Research, said in his proposed class-action complaint on Thursday that Musk’s issuance of materially false and misleading information harmed short-sellers like himself, as well as those hoping Tesla’s stock price would rise, Reuters reports.
The shareholder lawsuit is one of at least seven targeting Musk since he stunned investors by announcing on Twitter on Aug. 7 that he might take Tesla private for US$420 per share, in a US$72 billion transaction for which “funding” had been “secured”, the report noted.
Musk’s Aug. 7 announcement drove Tesla’s share price up more than 13 percent from its close the prior day. The Tesla chief later announced on Aug. 24 that the company will stay public.
“Defendant Musk artificially manipulated the price of Tesla securities with objectively false tweets in order to ‘burn’ the company’s short-sellers,” 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.
Musk has long used Twitter to criticize short-sellers. Left alleged that the Tesla CEO’s conduct violated federal securities laws.
The proposed class period runs from Aug. 7 to Aug. 17, over which time Left said he bought and sold many millions of dollars of Tesla shares.
That period ended after the New York Times published an interview in which Musk, who owns about one-fifth of Tesla, described severe stress he faced running the company.
On the evening of Aug. 24, Musk, by then facing US Securities and Exchange Commission scrutiny into the factual accuracy of his “secured” tweet, blogged that Tesla would remain public.
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