Tesla CEO Musk accused of defrauding shareholders, sued by investors


Tesla CEO Musk accused of defrauding shareholders, sued by investors

Tesla Inc (TSLA.O) and Chief Executive Elon Musk were sued twice on Friday by investors who said they fraudulently engineered a scheme to squeeze short-sellers, including through Musk's proposal to take the electric vehicle company private.

One expert, Jill Fisch, a business law professor at the University of Pennsylvania Law School, said Chamberlain's and Issac's lawsuits will only be successful if they can prove Musk and Tesla did not actually seek or "secure" funding for the transaction.

After the tweet, Tesla's stock rose enough for Musk's net worth to grow by $1.4 billion (according to Hypebeast).

The two lawsuits filed by Isaacs and William Chamberlain on Friday alleged that Musk and Tesla's behaviour following the tweets violated USA securities law, and artificially inflated the company's share price.

Elon Musk - the founder, CEO, and lead designer at SpaceX, and the co-founder of Tesla - speaks at the International Space Station Research and Development Conference in Washington, US, July 19, 2017.

The two separate cases have been filed in a court in the Northern District of California, which is not far from where Tesla is located, Palo Alto. The share price later fell.

Musk's August 7 tweets helped push Tesla's stock price more than 13 percent above the prior day's close.

Tesla's board has allegedly not yet received comprehensive information regarding the finances required to take the company private, Reuters reports, citing sources familiar with the matter.

Isaacs accused Musk of making false and misleading statements to inflate Tesla's stock price, and that Tesla "doubled-down" on those statements by failing to correct them.

Tesla's share price edged higher as markets closed late last night, increasing 0.86 per cent to $355.49.

The proposed class period in Isaacs' lawsuit runs from the afternoon of Aug. 7 through the next day, and in Chamberlain's lawsuit runs from Aug. 7 to Aug. 10.

According to his complaint, Isaacs bought 3,000 Tesla shares on August 8 to cover his short position.