>> Tesla CEO Elon Musk's bombshell tweets earlier this week about taking the company private is already creating a legal headache. On Friday, an investor sued Musk and Tesla in a proposed class action complaint saying they defrauded shareholders in a scheme to manipulate the electric car company's stock price.
The lawsuit was filed with the federal court in San Francisco. Reuters correspondent Alexandria Sage.>> The lawsuit alleges that Elon Musk tweeted about going private with Tesla in order to dessimate short sellers. Now certainly Musk has been on a rampage against short sellers for months now. This is one of the most shorted stocks out there, Tesla is.
And there has been a very public feud between short sellers and Musk for a weeks, if not months.>> Short selling is a bet against a company. You borrow and sell shares at a certain price, and when the stock falls you buy them back at a cheaper price and return them and pocket the difference.
But when the stock goes up, you have to buy high to return the shares and you lose. And that's what the lawsuit claims happened as Tesla shares soared over ten percent on Tuesday when Musk tweeted the proposal. By Friday most of those gains were erased. The lawsuit points to Musk and Tesla's various tweets and posts about having secured funding to take the company private at $420 a share, a $72 billion valuation, calling them false and misleading.
Whether Musk has funding and who would fund it has been one of the biggest questions this week. Reuters late Thursday exclusively reported that even Tesla's board hadn't yet received a detailed financing plan from Musk, and was seeking more information about his proposal. And the Wall Street Journal reported on Wednesday that the US Securities and Exchange Commission was looking into the tweets and whether they were truthful.