2 lawsuits and a securities law violation enquiry to follow.
Tesla and its boss Elon Musk are currently facing inquiries and two lawsuits over calls to privatise the company last week, saying that the manner with which they did so (with a tweet from Musk first) violated securities laws and artificially boosted the stock, causing undue losses to Tesla stock short sellers.
According to a Reuters report, the claims that Musk made false & misleading claims (saying shares would be bought at US$420 and that the money needed to do so was “secured”), and that it was a “nuclear attack” with the sole intention to “completely decimate” those who shorted Tesla’s stocks.
It was last Wednesday that Musk tweeted: “Am considering taking Tesla private at $420. Funding secured.” He didn’t elaborate as to where he’d managed to secure the US$72-billion needed to make such a move. And after an interminably-long wait, Tesla released an email to employees explaining how the firm would go about privatisation, detailing the “nice premium” in store for those who choose to sell and that the move was ultimately in the hands of the Tesla board.
Following the tweet and email, Tesla’s prices rose by as much as 12% above the pre-tweet trading price, which then prompted the US Securities & Exchange Commission to send a formal enquiry to the company to prove that the claims that it and its CEO had made were not untrue. Depending on what’s turned up by that enquiry an investigation could be opened into the company, though that’ll only happen if Musk was actually lying.
This is not the first time that major announcements about Tesla were made via less-than-proper channels, and not the first tweet by Musk in recent weeks that have resulted in significant backlash. While the “pedo guy” tweets were in poor taste, Musk’s privatisation tweets could have much wider repercussions, as SEC fines & restrictions could be in store if the firebrand CEO is found guilty of market manipulation.
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