It seems Elon Musk’s legal issues continue to bloom each day. That is because the Tesla CEO is facing an investor lawsuit, as reported by BBC. He and the company are basically sued due to manipulation of share prices with the CEO’s bombshell tweet. The latter, in particular, discusses his idea about taking the company private and that funding is already secured.
Musk said on Tuesday that de-listing from the stock exchange might just be the “best path forward” for the company. Unfortunately for him, his tween affected the company’s share price, which went up 11% to nearly $380, though it fell back. According to some short-sellers, particularly those who bet on share price falls, there was an agenda behind his tweet. They believe that the American entrepreneur did it in order to mislead the market.
In context, Tesla’s founder and chief executive suggested that he loved the idea of taking the company private. Apparently, this move involved a deal that is worth $72 billion. This automatically values the company at a share of $420. The only catch, however, is that he did not determine exactly where the money for such a deal would come from. It is worth noting that the deal is believed to be the largest of its kind for more than a decade.
The owner of a fifth of the company has already complained in the past about the so-called “negative propaganda” directed towards him by short-sellers. By going private, he believes that this would protect the company from all sorts of distractions of share price volatility, including the never-ending pressure of meeting quarterly financial targets.
Short-sellers are simply those who acquire profit by borrowing shares. From there, they sell these shares and buy them back but an expected lower price. These are the same individuals who, in one way or another, clamoured to have lost millions due to the Tesla CEO’s comments.
Plaintiff Kalman Isaacs alleges Tusk’s comments to be aimed at “completely decimating” short-sellers. His lawsuit, as well as the other one filed by William Chamberlain, faults Musk and Tesla of violating federal securities laws and, at the same time, artificially inflating the company’s share price. Neither Musk nor the firm have commented on the lawsuit, though. The lawsuit was reportedly filed in a federal court in San Francisco.
As of press time, the U.S. Securities and Exchange Commission is conducting an investigation which should determine whether or not Musk’s “funding secured” tweet was really factual. Unfortunately for the company, its CEO’s comments only intensified the scrutiny the firm received.
SEC enforcement attorneys in the San Francisco office already started gathering general information about the company’s public pronouncements. The latter were about its manufacturing goals and sales targets.
There are also other investors who joined the legal spree and they themselves filed lawsuits thereafter. The cases are expected to be consolidated and started even before a single judge.
If one is to buy out shareholders at the price Musk mentioned, which is almost 25 percent above where the stock was trading at the time of his comments, would automatically make the deal reached a worth of $82 billion. After adjusting for inflation, it is safe to say that the figure is more than the record-setting buyout of RJR Nabisco, a company that closed in 1989.
Musk is not new to legal controversies, though. In fact, it was only last month when he was forced to apologize after insulting a British diver who helped in the rescue of a youth football team from a cave in northern Thailand.