Lawsuits accuse Tesla's Musk of fraud over tweets, going-private proposal

Tesla's board might not know where Elon's 'secure' funding is coming from

The share fall has been fueled by investor skepticism over the deal's prospects and media reports that US regulators are asking Tesla why Musk announced his plans on Twitter and whether his statement was truthful.

In a research note, Bernstein analyst Toni Sacconaghi said, "if no firmer details emerge. investors would likely increasingly debate Musk's credibility and seemingly unhealthy focus on the shares' price and volatility". "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". A Musk investigation might be a best-case scenario for Tesla shorts, but CNBC's Jim Cramer said an investigation is a longshot. If it's accurate, the report highlights that Musk's initial description of the plan which mentioned that the funding had been secured wasn't exactly true.

Tesla did not respond to Reuters' requests for comment.

"Am considering taking Tesla private at $420".

Tesla has been targeted by short sellers - the hedge fund managers Jim Chanos and David Einhorn in particular - who are betting on the company's failure and, according to S3 partners, have lost more than $4.4 billion since January as Tesla's share price rose. Musk's tweet about taking Tesla private sent the stock soaring 11 per cent Tuesday and cost short sellers roughly $1 billion, according to some estimates.

Emboldened, shorts have pushed Tesla short interest percentage to 27.3 percent of the float on Thursday, up from 27.2 percent on Monday, S3 data showed.

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"Shareholders could potentially be misled if the statement omits material information", attorney Joe Tabacco said.

"'Funding secured' is a very strong term, and it has legal consequences", Pitt said.

Perhaps that's what was missing when Elon Musk and Masayoshi Son met previous year.

"We wonder whether surge production techniques to support self-congratulatory tweets are economically efficient ways of ramping production, or whether customers will be happy with the quality of a auto rush through production to prove a point to short sellers", the letter said. And ultimately, any punishment Musk or Tesla would receive would depend on the amount and strength of evidence the SEC found.

He could also seek funding from sovereign wealth funds such as Saudi Arabia's, which has just taken a stake in Tesla estimated at between three percent and five percent.

"This whole course of events is highly problematic", Pitt said.

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