Tesla Inc TSLA’s battle with short sellers has gone from the trading floor to the courtroom.
What Happened
Andrew Left of Citron Research filed a federal class action lawsuit in the Northern District of California Thursday alleging that Tesla and CEO Elon Musk violated federal securities laws with a reckless and ultimately fruitless discussion of a take-private path.
According to Left, Musk’s public considerations were meant to manipulate Tesla’s stock price to make good on previous threats to “burn” short sellers. Informal tweets about taking Tesla private sent the stock up nearly 11 percent.
“In response to the tweets, many Tesla short-sellers were forced to cover their positions at artificially high prices, losing approximately $1.3 billion in a single day, according to media reports,” the lawsuit said.
Left is suing “individually and on behalf of all others similarly situated,” according to the court filing. Specifically, he represents those who bought, sold or transacted in securities between Aug. 7 and Aug. 17 — the period of ambiguity around Tesla’s future on the markets.
Tesla had not responded to a request for comment on Left's lawsuit from Benzinga at the time of publication Thursday.
Why It’s Important
Not only does the lawsuit challenge Musk’s continued leadership of Tesla, which has been called into question by Street experts, but it could bring unwanted press and financial pressure upon the already struggling automaker. Left's lawsuit seeks an award of damages, interest and injunctive relief for both the short seller and the class he represents.
“Plaintiff and the class have suffered damages in that, in reliance on the integrity of the market, they paid artificially inflated prices for Tesla securities,” the lawsuit said. “Plaintiff and the class would not have purchased Tesla securities at the prices they paid, or at all, if they had been aware that the market prices had been artificially and falsely inflated by defendants’ misleading statements.”
What’s Next
In his filing, Left demands a trial by jury against both Tesla and Musk. Neither the company nor its head have responded to the filing.
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Photo by Heisenberg Media/Wikimedia.
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