Another Tesla investor has filed a lawsuit against Tesla and CEO Elon Musk, claiming he fraudulently engineered a scheme to artificially inflate the company’s stock price when he tweeted out a proposal last week to take it private.
The lawsuit filed Monday follows two others from last week, and comes in response to Musk’s surprising—and apparently not very well thought out—tweet that he might take Tesla private, at a price of $420 per share. Musk said “funding” for the proposal had been “secured.”
In the latest complaint, filed in U.S. District Court, plaintiff John Yeager said he purchased 9,200 shares of Tesla stock after Musk fired off his tweet, which caused the company’s share price to spike 11 percent, closing Aug. 7 at $379.57.
But Yeager says the statements were “false and misleading” because Musk had not lined up secure financing to take the company private.
“Rather, Musk’s tweets were an ill-conceived attempt to manipulate the stock price of Tesla upward in order to burn investors who had sold Tesla stock short,” the complaint says. “Musk has a long- standing public feud with short sellers and has threatened them in the recent past.
Musk on Monday published a blog post identifying the Saudi sovereign wealth fund as the possible backer, and claimed he left a meeting last month assured the oil-rich nation could back the move. A Teslas spokesperson declined to comment on Tuesday. Yeager’s attorneys couldn’t immediately be reached.
Shortly after Musk’s tweet, more information started to emerge. The SEC reportedly opened an inquiry into the veracity of Musk’s tweet, and multiple news outlets have confirmed that no investment banks had been retained or were even aware about the proposal. (Musk said Monday that he’d hired Goldman Sachs, and Tesla’s board created a special committee to examine the take-private proposal on Tuesday.)
By the time the market closed Aug. 9, Tesla’s share price had fallen back to $352.27.
“The decline in Tesla’s common stock price was a direct result of the nature and extent of Defendants’ fraud finally being revealed to investors and the market,” Yeager alleged.
Typically, securities lawsuits are settled, and rarely make it to trial, as The New York Times noted Monday in a lengthy piece about the unraveling situation. But the cases underscore just how much trouble Musk’s tweet have caused the company in recent days.
Yeager’s complaint asks a judge to certify class-action status, and the proposed period covers August 7-9.