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Tesla and more specifically its chief executive Elon Musk are facing three lawsuits over an already notorious tweet by Musk, in which the CEO said he was planning to take the company private and had already secured funding.
It was this phrase, “funding secured”, that alerted the Securities and Exchange Commission, which launched a probe into this claim, prompting Musk to come forward with the revelation that he had for years been in talks with the Saudi sovereign wealth fund to take the company private.
Yet the tweet and the following explanation caused changes in the Tesla stock price within two days, which allegedly affected shareholders who bought Tesla stock in the period.
As the law firm representing plaintiffs in the latest among the three cases states in an update, “On August 7, 2018, Tesla CEO Elon Musk proclaimed via social media that “[a]m considering taking Tesla private at $420. Funding secured,” among other things. On this news, Tesla shares soared to close at $379.57 that day. On August 9, 2018, media reports highlighted a probe by the SEC into the veracity and nature of Musk’s statements as well as an investigation by Tesla’s Board of Directors into the “secured” funding.
On this news, the price of Tesla’s shares plummeted.”
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All three lawsuits seek class action status, but while the first one seeks to represent shareholders who only bought Tesla shares on August 7 and 8, the second one seeks plaintiffs that bought and sold Tesla stock in the period. The third lawsuit has extended the period, seeking shareholders who bough or sold Tesla stock between August 7 and 10.
The allegations made in the three lawsuits are identical, according to a CNN report: Musk had given misleading information to, basically, get back at short sellers. Yet, the information may not have been misleading if it was true, one legal expert told CNN.
According to Pennsylvania University business law professor Jill Fisch, the lawsuits against Musk and Tesla only have a chance if the plaintiffs can prove that Musk had not sought funding for the operation and had not, in fact, “secured” it.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.