Electric car maker being taken to task about claims it has secured funding to go private
Two class-action lawsuits have been filed against Tesla and its outspoken CEO Elon Musk, who announced on Wednesday the company had “secured” funding to delist itself. It has also been reported the company is under investigation from authorities over these claims.
According to Reuters, the separate lawsuits by Kalman Isaacs and William Chamberlain accuse Tesla and Musk of issuing statements that are in violation of securities law, artificially boosting the stock price, and putting a squeeze on short sellers.
Issacs claims Musks statements were false and misleading, and were a “nuclear attack” designed specifically to “completely decimate” people who have shorted Tesla’s stock.
On Wednesday Musk tweeted: “Am considering taking Tesla private at $420. Funding secured.”
The company later published an email sent by Musk to the company’s employees outlining how the company might be taken private, yet still provide stock options for existing shareholders.
If such a deal goes through, and is approved by both shareholders and the SEC, it will require about US$72 billion ($97 billion) in funding. No details were provided about how or through whom the money has been secured.
Musk argued any such move would protect the company from swings in the stock market, and improve Tesla’s ability to think long term, as opposed to chasing quarterly targets.
These pieces of news pushed Tesla’s share price around 12 per cent higher, although most of those gains have since disappeared as reports emerged from The Wall Street Journal and Bloomberg stating the US Securities and Exchange Commission (SEC) had sent a formal enquiry to Tesla about its funding claims.
An enquiry may not be followed by an investigation, but if one is opened the company and its CEO could be found guilty of being untruthful or, worse still, manipulating the market to deliberately hurt short sellers.
At the top end, punishments include fines running into the hundreds-of-millions of dollars, being barred from sitting on the board of a public company, or prison time.
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