Two investors filed suit against Tesla CEO Elon Musk and the electric auto company after he tweeted he wanted to take the firm private, causing the share price to inflate and short-selling investors to lose millions.
Tesla did not respond to a request for comment on the proposed class-action complaint filed in the federal court in San Francisco.
Elon Musk recently took Tesla's shareholders and the market by surprise when he tweeted that he's considering taking Tesla private at $420 per share.
Short-sellers of Tesla's stock have faced increasing aggression from Musk over recent months, with the billionaire citing the lack of market support as one of the main reasons he wants to take the company private. The main accusation against both is that they perpetrated a fraud on the shareholders of Tesla by misleading that the company is being turned into a privately held company. Tesla has not commented on this report.
Other investors have begun to file lawsuits as well.
Tesla borrowed at hefty interest rates previous year, the person said, an additional cost burden for a company that had only $2.2 billion in cash flow at the end of June. The case is going to be consolidated and presented in front of a single Judge to solve the matter soon.
August 1, 2018 - Tesla reports its biggest-ever loss but shares rise on Musk's claims of positive cash flow and profit in the second half of 2018, and signs of more consistent Model 3 production.
"Shareholders could potentially be misled if the statement omits material information", attorney Joe Tabacco said. Previously, he has a history of setting unrealistic targets.
Investment bankers and Wall Street automotive sector analysts have so far reacted with skepticism saying it would be hard for Mr. Musk, whose net worth is pegged by Forbes at $22-B, to raise the equity and debt financing needed for the deal given Tesla is not turning a profit.
Musk had raised the go-private possibility with the board last week, according to a statement from six of Tesla's nine directors.