Musk May Face Multiple Sets of Investor Lawsuits Over His Infamous Tweet
Musk May Face Multiple Sets of Investor Lawsuits Over His Infamous Tweet
(Bloomberg) -- Elon Musk’s now-infamous tweet saying he’d secured funding to take Tesla Inc. private did so much damage to so many different kinds of investors that he should have to face not one, but two or even three separate groups of securities fraud lawsuits, according to lawyers for shareholders.
A federal judge is weighing whether to divvy the litany of complaints into categories because some aggrieved investors had traditional long positions on the electric car-maker’s shares, while others were shorting the stock or held options.
The case presents “so many different types of investors and investments, long and short,” U.S. District Judge Edward Chen said at a hearing Thursday in San Francisco. “That may have some effect on how I measure who has the greatest financial interest.”
At issue are claims that Musk and Tesla manipulated the market with his Aug. 7 tweet -- “Am considering taking Tesla private at $420. Funding secured” -- and another tweet the same day saying, “Investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote.”
Reed Kathrein, a lawyer for some of the investors, said it’s a matter of protecting the disparate interests at stake.
“In this unusual case where shorts and option traders claim the largest losses -- yet are susceptible to unique defenses and damage calculations -- such separate representation is needed,” he wrote in a court filing.
Dean Kristy, a lawyer representing Tesla and Musk, also argued that one type of investor can’t represent all shareholders suing the company. “It can’t be everybody, that just doesn’t work,” he said.
It’s “not really our place” to say who the lead plaintiff should be, Kristy said. The company’s primary concern is that foreign investors, from Hungary, the Middle East and Brazil, agree to rules of pretrial information sharing in the U.S. “I don’t want to hear about the Hague convention,” Kristy said. “They want to sue here, they want to lead here, I think they should be here.”
The case is Isaacs v. Musk, 3:18-cv-04865, U.S. District Court, Northern District of California (San Francisco).
To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net
To contact the editors responsible for this story: Elizabeth Wollman at ewollman@bloomberg.net, Peter Blumberg, Joe Schneider
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