The prominent electric car manufacturer Tesla is facing three new class action lawsuits stemming from a series of tweets posted by founder Elon Musk last week. Since the August 7 Twitter stream, three lawsuits and an investigation by the Securities and Exchange Commission have begun.
The first two lawsuits came from investors on August 10, alleging the founder’s Twitter-based proposal to take the company private was a ploy to influence the company’s stock value. The third class action lawsuit, filed in the U.S. District Court for the Northern District of California, alleges violations of the Securities Exchange Act of 1934 and could include any buyers and sellers who publicly traded Tesla stock between August 7 and August 14.
The proposal to take Tesla private
The first of the tweets in question, posted at 9:48 a.m. on August 7, reads, “Am Considering taking Tesla private at $420. Funding secured.” Musk replied to the tweet within 90 minutes, adding, “Shareholders could either to(sic) sell at 420 or hold shares & go private.”
The SEC investigation and lawsuits hinge on one particular aspect of the tweets; neither Tesla nor Musk can confirm the secured funding referenced in the first tweet. From preliminary investigations and subpoenas it appears the funding was merely based on discussions with potential investors, making it far from “secure” as originally implied.
The tweets sent the company stock price on a rise in the initial days, but prices began to fall as it became clear the proposal was potentially not based in real business dealings. The initial bump increased the stock price by 13 percent, but that gain has receded about two-thirds since word of the lawsuits and investigation made headlines.
Inclusion in class action lawsuits
Each of the lawsuits include differing class periods for potential plaintiffs. The first spans only the first 24 hours of trading, the second covers three days and the third encompasses the full week between August 7 and 14.
These lawsuits provide plaintiffs the chance to collectively show the impact of fraudulent activity and pursue justice collaboratively. If you, as a consumer or investor, fall subject to potential fraud, it’s worth pursuing remedies with the assistance of skilled litigators who can get a return from the damage done.