Class-Action Lawsuit Filed Against Tesla After Elon Musk's Tweet
*By Hope King*
Tesla was hit with another class-action lawsuit Friday, growing out of CEO Elon Musk’s tweeted remark that he was considering taking the company private.
The suit, which was filed in U.S. District Court for the Northern District of California, comes three days after Musk posted a tweet saying that he intended to take the company private at $420 a share and that funding was “secured.” Shares of Tesla ended the day up 11 percent.
The lawsuit alleges that Tesla and Musk violated the Securities Exchange Act of 1934 in sending the tweet by making allegedly false and misleading statements to defraud Tesla investors.
The suit, *William Chamberlain v. Tesla, Inc.*, also alleges that “manipulative acts" resulted in "a short squeeze that drove the price of Tesla shares to artificially high levels.” It covers those who purchased or sold shares on and between Tuesday through the end of day Friday and whose investments were damaged by Musk’s comments.
Earlier in the week, Cheddar spoke with Reed Kathrein, partner at the law firm Hagens Berman, which filed the new suit.
“We represent investors who have lost money as a result of this tweet,” Kathrein said. “All indications are that his statement that funding is secured is false or grossly exaggerated.”
On Wednesday Hagens Berman [asked investors](https://www.prnewswire.com/news-releases/hagens-berman-alerts-short-and-put-option-investors-in-tesla-inc-tsla-to-the-firms-investigation-of-possible-disclosure-violations-300694283.html) to contact the firm if they sold shares short or purchased put options on or before Aug. 7 and suffered losses. Kathrein said “a couple hundred people” contacted the firm within the day.
“Generally, the information that they’re sending us is the amount of their losses or how they lost the money,” Kathrein said. “A minority of them are going into tirades,” he added, laughing.
He said the question is whether or not Musk’s statement about securing funding is true. “I have no doubt he wants to take the company private,” he told Cheddar. “Our job," he said, is to protect investors.
Musk has been in public markets for long enough to know his tweets would impact on markets, Kathrein added. “I think his statement was directed at short sellers.”
Cheddar has reached out to Tesla for comment.
Since rising sharply in the immediate aftermath of Musk’s statement, Tesla stock has largely given back its gains, closing on Friday at $355.49.
Kathrein described the investors who contacted him and his firm as “mom and pops and smaller investors who panicked and covered their short positions.”
Kathrein himself owns a Tesla Model S and says he loves it. “It’s such a great car and I cannot see me going back,” he said. “I wish the best for him and I wish he succeeds… [but] don’t mess with my investors.”
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