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7 Sep, 2018 09:11

Elon Musk sued for ‘trying to burn’ short-sellers with Tesla-go-private tweets

Elon Musk sued for ‘trying to burn’ short-sellers with Tesla-go-private tweets

One of Wall Street's prominent short sellers, Andrew Left, has filed a class-action lawsuit, accusing electric car maker Tesla and its CEO Elon Musk of trying to “burn” investors with “objectively false tweets.”

Short selling is a market position motivated by the belief that a security’s price will decline, enabling it to be bought back at a lower price to make a profit. Last month, Tesla’s founder tweeted about plans to take the company private.

The announcement sent Tesla stock surging by more than 10 percent. Later, Tesla’s eccentric CEO tweeted that he was negotiating the go-private deal with buyout firm Silver Lake, investment bank Goldman Sachs and several other firms, including the Saudi Arabian government.

The news outraged investors and analysts, as well as the company’s board members, who urged Musk to stop posting on Twitter for some time. The US Securities and Exchange Commission subpoenaed Musk to explain the tweet. The CEO described the privatization tweets as an attempt to be transparent.

According to the lawsuit, filed on Thursday in San Francisco federal court, false and misleading information, issued by Musk, harmed short-sellers and those believing Tesla’s stock price would rise.

“Defendant Musk artificially manipulated the price of Tesla securities with objectively false tweets in order to ‘burn’ the company’s short-sellers,” Left said, stressing that Musk’s actions violated federal securities laws.

“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,” Left, the founder of one of the longest-running self-published blogs, Citron Research, said.

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