Tesla Inc (TSLA.O) and Chief Executive Elon Musk were sued twice on Friday by investors who said they fraudulently engineered a scheme to squeeze short-sellers, including through Musk's proposal to take the electric auto company private.
Buying out shareholders at the price Musk quoted - nearly 25% above where the stock was trading at the time of his initial tweet - would make the deal worth $82 billion.
Tesla's share price edged higher as markets closed late last night, increasing 0.86 per cent to $355.49.
"Musk's statement that he had secured funding was especially material and significantly moved the market", Isaacs stated in the complaint.
The case is Isaacs v. Musk, 18-cv-04865, US District Court, Northern District of California (San Francisco).
"I have not seen significant short covering in Tesla since Elon Musk's tweets", Dusaniwsky told Benzinga.
William Chamberlain, another investor, also filed suit with accusations of artificial inflation.
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June 21, 2016 - Tesla announces its plan to buy Solar City, a solar energy system company in which Musk holds a stake, for $2.9 billion.
"Musk has every right to say that he has a potential $420-per-share takeover bid lined up, provided that he doesn't sell stock into the hype", Cramer said this week.
In a blog post, he said going private would liberate the company from the quarterly reporting cycle, allowing it to be "free from as much distraction and short-term thinking as possible".
Elon Musk is Tesla's largest shareholder, with a 20% stake in the company. "Because Musk has not secured financing, and has issued false and materially misleading information into the market, short sellers of Tesla stock were forced to cover their positions by purchasing shares at artificially inflated prices after 12:48pm on August 7, 2018".
It had also caused Tesla securities buyers to pay inflated prices, he claimed.
The lawsuit against Elon Musk Mr. Isaacs is a short-seller, and this is apparently legal on Wall Street, even though another short-seller, Carson Block of Muddy Waters Capital says, "Short-sellers are not ever going to be loved by Wall Street in the United States, but we're pretty lucrative for banks, because of the borrow fees we pay".
Thomas Farley, former head of the New York Stock Exchange operator NYSE Group, said Wednesday on Twitter the matter would be an "easy one" for the SEC to investigate.