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Elon Musk, the co-founder, CEO and chairman of the electric vehicle manufacturing giant Tesla Inc., tweeted on August 7, 2018 that “Am considering taking Tesla private at $420. Funding secured.” On the same day, Musk confirmed this plan on Tesla’s blog and an email he sent to Tesla employees. After this information came out, Tesla’s stock price went up by 11%. However, on August 8, SEC made inquiries about whether Musk truly secured funding to take Tesla private, and multiple media even reported that Musk did not secure the funding. On August 13, Musk once again tweeted that he had retained financial advisors and legal advisors on the proposal of taking Tesla private. Nevertheless, Bloomberg reported that this was not true. After these public statements of incorrect information and adverse disclosure, Tesla’s stock price sharply fell.
A group of investors (all or many of them are Chinese) who purchased Tesla’s stock between Aug. 7 and Aug. 17, 2018 filed a class action complaint against Tesla and Musk for securities fraud, arguing that Musk’s statements on Twitter, email, and blog about having secured funding to take Tesla private were false and misleading and thus caused them damages, and that Musk and Tesla’s misrepresentation and knowing failure to correct the mistaken statements violated the Securities Exchange Act and Rule 10b-5. The case has been submitted to a California District Court.
Written by Derek Tai
