Tesla hit with new lawsuit alleging Elon Musk manipulated stock price

Tesla CEO Elon Musk has attracted controversy for tweets he sent about the possibility of taking Tesla private.Kiichiro Sato / Associated Press

• Tesla is facing another lawsuit accusing CEO Elon Musk of manipulating the company’s stock price.
• A complaint filed on Monday in US District Court in California alleges that some investors purchased Tesla stock “at artificially inflated prices and suffered significant losses and damages once the truth emerged” that Musk had not secured the funding necessary to convert Tesla into a private company for $420 per share, as he said on August 7.
• Tesla declined Business Insider’s request for comment.

Tesla is facing another lawsuit accusing CEO Elon Musk of manipulating the company’s stock price. The suit follows two lawsuits filed against the company last week by investors alleging securities fraud.

A complaint filed on Monday in US District Court in California alleges that some investors purchased Tesla stock “at artificially inflated prices and suffered significant losses and damages once the truth emerged” that Musk had not secured the funding necessary to convert Tesla into a private company for $420 per share, as he said on August 7.

“Am considering taking Tesla private at $420. Funding secured,” Musk said via Twitter.

“Investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote,” he later said.

Tesla’s share price surged after Musk’s first tweet, rising by as much as 12%, to over $381, before settling at $379.57 when trading closed on August 7. But by the end of trading on August 9, it had fallen to $352.45 as reports emerged that the Securities and Exchange Commission made an inquiry into Tesla about whether one of Musk’s tweets regarding the possibility of taking the company private was truthful. 

According to the lawsuit, “Musk’s tweets were an ill-conceived attempt to manipulate the stock price of Tesla upward in order to burn investors who had sold Tesla stock short,” and, “had the desired effect of creating a massive one-day increase in the price of Tesla stock and causing short sellers large losses.”

Tesla declined Business Insider’s request for comment.

On Monday, Musk said in a statement that he used the phrase “funding secured” because he believed there was “no question” Saudi Arabia’s Public Investment Fund would provide funding for a deal to convert Tesla into a private company after a July 31 meeting with the fund’s managing director.

But Musk didn’t mention any legally-binding agreements that were in place at the time he sent the August 7 tweet and said he was in discussions with the Saudi fund and other investors, which suggested some sources of funding were not be settled before the tweet was sent.

On Tuesday, Tesla said its board of directors had formed a special committee to examine Musk’s preference to take the company private.

Get the latest Tesla stock price here.