Elon Musk sued over proposal to take Tesla private

Sean Reid
August 14, 2018

Elon Musk - the founder, CEO, and lead designer at SpaceX, and the co-founder of Tesla - speaks at the International Space Station Research and Development Conference in Washington, US, July 19, 2017.

August 7, 2018 - Musk surprises investors by using Twitter to announce he is considering taking Tesla private at $420 per share, adding "Funding secured".

On Tuesday, Musk said he could finance the buyout of Tesla, founded in 2003, at a large premium to current valuation, at a price of $420 a share.

As the result of his messages, Tesla share prices shot up 11 percent to nearly $380, causing short sellers to claim he had manipulated share prices and misled the market.

Musk had earlier discussed the prospect of taking the company private, with Saudi Arabia's sovereign wealth fund.

Tesla declined to comment on the suit.

Some analysts have suggested that Musk could convince Tesla's top shareholders, such as Fidelity Investments and China's Tencent, to roll their equity stakes into the deal, thereby significantly reducing the amount of money needed to be raised.

Musk has not offered evidence that he has lined up the necessary funding to take Tesla private, and the complaints did not offer proof to the contrary.

San Francisco attorney Joe Tabacco expressed his view that shareholders may actually have a viable claim against Tesla, according to Bloomberg.

Many investors place their faith in Tesla because they believe that it is leading the electric auto revolution alone.

Tesla borrowed at hefty interest rates past year, the person said, an additional cost burden for a company that had only $2.2 billion in cash flow at the end of June. Eventually, the cases will be consolidated and go before a single judge. "Anybody who purchased the stock on that news, if the news was in fact misleading, could have a claim, however, it would be very short class period".

Even a "preliminary commitment" with an investor or bank would be enough to support the idea that Musk's statements were made in "good faith", Fisch said.

Musk has a history of setting aggressive sales targets that critics have called unrealistic.

There's a nagging question on Wall Street after Tesla Inc.

Tesla has yet to make a public statement on the matter.

Other reports by

Discuss This Article