While Elon Musk may not actually ever go to jail over his reckless tweeting, his decision to announce his desire to take Tesla private is already coming back to haunt him: Andrew Left, founder of Citron Research and a well-known short-seller, has sued Musk and his car company for alleged “price manipulation.”
The suit, filed in the United States District Court of Northern California and posted online, accuses Musk and Tesla of having “artificially manipulated the price of Tesla securities to damage the Company’s short-sellers, and in the process, damaged all purchasers of Tesla securities by issuing materially false and misleading information.”
The lawsuit makes specific mention of Musk’s tweet, focusing especially on his claim that he had the funding secured to take the company private. While trading was temporarily halted on Tesla’s shares after Musk sent out his tweet, they surged after trading resumed, hitting an intraday high of $387.46.
However, Musk’s claims of having funding secured were quickly called into question, despite the fact that Musk tried to clarify this point in a follow-up blog post in which he asserted that it would come from the Saudi Arabian sovereign fund. The Securities and Exchange Commission has since served Tesla with a subpoena, reportedly zeroing in on Musk’s claim of having the funding secured.
Musk announced on Aug. 24 that he would not be taking Tesla private. But despite essentially capitulating to public pressure, Musk nonetheless insisted that “there is more than enough funding to take Tesla private was reinforced during this process.”
It’s also worth noting that Musk has kept up a long-running and very public beef with short-sellers, once telling Rolling Stone that short-sellers are “jerks who want us to die” by “constantly trying to make up false rumors and amplify any negative rumors.” This beef was mentioned by Labaton Sucharow LLP, the law firm representing Left, in a press release announcing the lawsuit.
“This appears to be a textbook case of fraud,” Michael Canty, Labaton Sucharow partner and former federal prosecutor in the Eastern District of New York, said in a statement. “We believe Musk attempted to manipulate the price of Tesla securities with false and misleading tweets, in a directed effort to harm short-sellers.”
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