Tesla CEO Musk taunts short sellers amid legal scrutiny

Tesla CEO Musk taunts short sellers amid legal scrutiny

Two investors filed suit against Tesla CEO Elon Musk and the electric auto company after he tweeted he wanted to take the firm private, causing the share price to inflate and short-selling investors to lose millions.

Short-sellers of Tesla's stock have faced increasing aggression from Musk over recent months, with the billionaire citing the lack of market support as one of the main reasons he wants to take the company private.

One plaintiff Kalman Isaacs said the tweets were false, misleading and they amounted to a "nuclear attack" created to "completely decimate" short-sellers.

The comment by Elon Musk on Twitter on taking the company private alerted the Securities and Exchange Commission and the regulatory body is said to have initiated an inquiry into the issue.

The proposed class-action complaint filed by Kalman Isaacs in San Francisco federal court accused Tesla and Musk of trying to artificially manipulate the company's stock price.

The two separate cases have been filed in a court in the Northern District of California, which is not far from where Tesla is located, Palo Alto.

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Short-selling involves borrowing overpriced shares in the belief that their price will decline, so they can be sold and then bought back at a lower price.

No evidence has been presented by either side to prove or disprove that funding had been secured to take the company private.

But Isaacs said Tesla's and Musk's conduct caused the volatility that cost short-sellers hundreds of millions of dollars from having to cover their short positions, and caused all Tesla securities purchasers to pay inflated prices.

Tesla's share price edged higher as markets closed late last night, increasing 0.86 per cent to $355.49.

According to the complaint, Isaacs bought 3,000 Tesla shares on August 8 to cover his short position, or bet that the price would decline, in the company.

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