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Going-Private Proposal Tweet By Tesla’s Musk Taken To Court By Investors


08/12/2018


Going-Private Proposal Tweet By Tesla’s Musk Taken To Court By Investors
Investors of Tesla Inc sued the company and its Chief Executive Elon Musk twice on Friday alleging that both the company and the CEO had wrongfully constructed a scheme to put pressure on short-sellers which included the tweet by Musk where he proposed taking the company private.
 
It was three days ago that Musk suddenly tweeted a comment where he said that he w3as contemplating taking company private through a record $72 billion transaction which would result in the valuation of the company at $420 per share which had stunned investors and resulted in the law suit. Musk had also said that “funding” had been “secured.”
 
Musk had made false and misleading claims on Tweeter, claimed one of the plaintiff Kalman Isaacs in the law suit and added that a “nuclear attack” designed to “completely decimate” short-sellers was designed by the company also because it did nothing to correct the faulty statement made by Musk.
 
Tesla’s stock price was artificially inflated by Musk’s and Tesla’s which were in violation to federal securities laws, said Isaacs and William Chamberlain - the two investors in their law suits.
 
No comment was available from tesla about the law suits and the proposed class-action complaints which were filed at the federal court in San Francisco. The company is based in nearby Palo Alto, California.
 
The strategy of short-sellers is to borrow those shares that they believe are overpriced. They then sell them and later repurchase those shares after their prices potentially would have come down because of bulk selling. In this manner they make a profit. 
 
The activities of such investors have for long irritated Musk who has sometimes taken to Twitter to severely criticize such activities.
 
Shares of Tesla were pushed up by 13 per cent over the earlier day’s closing price on August 7 after the comments of by Musk on Twitter. 
 
Since then, about two thirds of the rise had been compromised by the stock partly because of reposts being published in the media that an inquiry about Musk’s comments by the U.S. Securities and Exchange Commission.
 
No evidence that the necessary funding to take Tesla private had been arranged by Musk was provided by him and neither did the complainants provide any evidence to the contrary.
 
Hundreds of millions of dollars had to be expended by short-sellers so that they could cover up their short positioning because of Tesla’s and Musk’s conduct, said Isaacs, and resulted in paying inflated prices by all Tesla securities purchasers.
 
Tesla’s market value exceeds $60 billion.
 
The complaint said that to cover his short position 3,000 Tesla shares on Aug. 8 were bought by Isaacs.
 
(Source:www.reuters.com)


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