Short Seller Sues Tesla, Elon Musk Over Take-Private Tweets
The complaint alleges that Musk knew at the time there was no financial backing for the proposed buyout and that the fallout led to significant losses for investors who bought Tesla stock between Aug. 7 and Aug. 17.
September 06, 2018 at 05:30 PM
4 minute read
Short seller Andrew Left on Thursday filed a securities class action against Tesla and its CEO Elon Musk, accusing Musk in California federal court of manipulating the company's stock with a controversial tweet about his plans to take the electric-car maker private.
Left, who publishes the online newsletter Citron Research, cited a series of public statements from Musk, including an Aug. 7 tweet in which the business magnate announced he was “considering taking Tesla private at $420. Funding secured.”
The complaint, filed in U.S. District Court for the Northern District of California, alleges that Musk knew at the time there was no financial backing for the proposed buyout and that the fallout led to significant losses for investors who bought Tesla stock between Aug. 7 and Aug. 17.
The surprise announcement sparked a probe by the U.S. Securities and Exchange Commission and weeks of volatility in Tesla's stock price, after media reports challenged Musk's assertions regarding investor support. Musk later backtracked and said in a blog post Aug. 24 that Tesla would remain a publicly traded company.
Left, a well-known short seller whose publication aims to identify overvalued firms, said the tweets were part of a “fraudulent scheme” designed to target investors who short Tesla stock by selling shares they don't own, on the belief that the price would likely decline.
“Defendant Musk artificially manipulated the price of Tesla securities with objectively false tweets in order to 'burn' the company's short-sellers,” Left said. “In the succeeding days, the truth regarding the supposedly 'secure' financing needed to effectuate the going-private transaction began to emerge, exposing the fraudulent scheme, and in the process, injuring class period investors as the price of Tesla securities deteriorated rapidly.”
Left is represented in the lawsuit by Labaton Sucharow and the San Francisco law firm Kerr & Wagstaffe. Labaton partner Michael Canty announced the suit in a press release Thursday afternoon.
“This appears to be a textbook case of fraud,” Canty said in the release. ”We believe Musk attempted to manipulate the price of Tesla securities with false and misleading tweets, in a directed effort to harm short-sellers.”
Tesla's press shop did not respond Thursday afternoon to an email seeking comment on the lawsuit.
According to the complaint, Tesla's stock surged nearly 11 percent to close at $379.57 per share on the day of Musk's go-private tweet. The spike, Left said, caused trading volume to jump to more than 30 million shares, representing more than $11 billion of purchases on the open market.
In response, short sellers were forced to cover their positions at “artificially high prices,” losing more than approximately $1.3 billion in a single day day, the complaint alleged.
Meanwhile, the Tesla's stock declined steadily over the next 10 days, after The Wall Street Journal reported Aug. 8 that the SEC was probing Musk's tweets. The following week, media reports refuted Musk's accounts that he had engaged Goldman Sachs and Silver Lake as financial advisers on the supposed bid to take Tesla private, indicating that Musk had not secured the financing he needed.
By Aug. 17, Tesla's shares were trading at $305.50, a decline of more than $74 from the close of trading on Aug. 7, the complaint said.
Left is represented by Canty, Christopher J. Keller, Eric J. Belfi, David J. Schwartz and Francis P. McConville of Labaton and James M. Wagstaffe and Frank Busch of Kerr & Wagstaffe. An online docket-tracking service did not list attorneys for Tesla and Musk.
The case is captioned Left v. Tesla.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllFederal Judge Rejects Teams' Challenge to NASCAR's 'Anticompetitive Terms' in Agreement
Film Company Alleges Elon Musk, Tesla Used AI to Mimic 'Blade Runner' Scene
6 minute readTrending Stories
- 1Elon Musk Names Microsoft, Calif. AG to Amended OpenAI Suit
- 2Trump’s Plan to Purge Democracy
- 3Baltimore City Govt., After Winning Opioid Jury Trial, Preparing to Demand an Additional $11B for Abatement Costs
- 4X Joins Legal Attack on California's New Deepfakes Law
- 5Monsanto Wins Latest Philadelphia Roundup Trial
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250