Embattled electric car manufacturer Tesla racked up its third class-action suit, filed this evening in California’s Northern District Court, stemming from bizarre and potentially unfounded tweets sent last week by CEO Elon Musk.
The first such suit was filed Friday by Tesla short seller Kalman Isaacs, who contended that the tweets were solely intended to manipulate the company’s stock price—a move that’s estimated to have cost Isaacs and those making similar bets upwards of $1 billion. Those advocating for or actually shorting his electric car venture have rankled Musk, who went so far as to call such traders “jerks who want us to die.” Another, similar class-action—Chamberlain v Tesla—came the same day.
Interestingly, John Yeagar, the plaintiff in this new suit, was not a short seller at all. His suit states that “the fraudulent nature of Musk’s statements was uncovered over the next two days when neither Tesla nor Musk substantiated Musk’s claim that there was secure financing for a going-private transaction at $420 a share” and causing the stock price to drop from “$379.57 per share, on August 7, 2018, to close at $352.27 per share, on August 9, 2018.” One assumes Yeagar jumped at the opportunity to buy Tesla stock and then sell it off at the proposed $420 per share price tag, only to see its value drop after investors began to question the veracity of Musk’s claims.
Yeagar’s filing reiterates what much of what the prior suits allege: that despite affirmative statements from Musk of having secured proper investment to go private, no such plans had been made.
In essence, what was initially considered to be a stupid weed joke has cost Musk the goodwill of Tesla fans (or at least those seeking to profit from his offer to go private at $420), deepened his already contentious relationship with short sellers, led to an SEC investigation, and could potentially cost him quite a losses in court.
Given the enormity of consequences, perhaps there’s some credence to Azealia Banks’s accusation of the CEO tweeting while tripping on LSD, given that main the alternative explanation is Musk engaging in obvious, poorly-executed fraud.