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Sep 6, 2018

Short Seller Andrew Left Sues Tesla and Musk I Market I Investopedia.


Caleb Silver



Elon Musk's infamous tweet from August 7th where he indicated he had the backing to take Tesla private at 420 per share is now the source of a lawsuit by famed short seller Andrew Left of Citron Research. The suit filed against both the company and Musk is claiming a violation of federal securities laws.
Am considering taking Tesla private at $420. Funding secured.
— Elon Musk (@elonmusk) August 7, 2018
The lawsuit, filed by Labaton Sucharow LLP, on behalf of Citron and its executive editor, Andrew E. Left, alleges that Musk, ..."artificially manipulated the price of Tesla securities with objectively false tweets in order to “burn” the Company’s short-sellers, something that Musk had also tweeted about on May 4, 2018.
Oh and uh short burn of the century comin soon. Flamethrowers should arrive just in time.
— Elon Musk (@elonmusk) May 4, 2018

Allegations of Fraud

Citron Research, a self proclaimed shareholder activist and short-seller, has been a vocal critic of Tesla and Musk prior to Musk's tweet from August 7th, but the decline in Tesla's share price once Musk backed away from the plan to take his company private prompted the action.
The suit, Left v. Tesla, Inc., No. 18-cv-5463 (N.D. Cal.), alleges that Musk was misrepresented that he had, "funding secured", for a buyout to take the company private, was in fact, a fradulent scheme that injured Tesla's shareholders. According to multiple reports, the Securities and Exchange Commission has reportedly opened a formal inquiry as to whether Musk manipulated Tesla's stock.  Tesla's shares were, as of close on September 5, 2018, trading more than 28% lower than they were on August 7th, before Musk's tweet.
In a press release issued by Labaton Sucarow, Michael Canty, a partner for the firm said, “This appears to be a textbook case of fraud...We believe Musk attempted to manipulate the price of Tesla securities with false and misleading tweets, in a directed effort to harm short-sellers.”
On August 24, 2018, Musk backed away from the plan to take his company private even though he believed he had actually secured the funding to do so. He claimed in a blog post on Tesla.com, that going private would have been a distraction for the company, its employees and shareholders.

Musk vs Shorts: The Saga Continues

Musk has a particular disdain for short-sellers and has actively derided them and those who doubt Tesla's prospects through his widely followed twitter handle. Neither he or the company has responded to the lawsuit from Citron Research as of the time of this writing.
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