Tesla, Musk Sued Over ‘Fraudulent Scheme’ To Go Private

Elon Musk’s Tesla tweets are no longer scaring short sellers

Musk tweeted on Tuesday that he had secured financing for a going-private deal, sparking speculation about who could fund such a large deal, particularly with the company's bonds rated junk by credit rating agencies.

"Ask TSLA to show you the agreement (s) signed by their funding source (s) by 5 pm EST that demonstrates funding is "secured" and 'certain, '" he wrote, using the company's ticker symbol. His personal stake in Tesla is nearly 20 percent.

"The fact that there has been no announcement clarifying, confirming, or denying the financing is surprising and puts Tesla and Musk at great risk", he said in an email.

One rumor floating around is that Musk has already spoken to someone at the Saudi Public Investment Fund, but nothing concrete has made its way into the media yet.

Reuters reported on Wednesday that SoftBank was not now pursuing a deal for Tesla given its investment earlier this year in rival GM Cruise.

Reuters reported on August 11 that the PIF has shown no interest so far in financing Musk's proposed deal.

The proposed class-action complaint filed by Kalman Isaacs in San Francisco federal court accused Tesla and Musk of trying to artificially manipulate the company's stock price.

Musk had raised the go-private possibility with the board last week, according to a statement from six of Tesla's nine directors.

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The sources requested anonymity because the deliberations are confidential. Tesla had no immediate comment.

The stock has since given back more than two-thirds of that gain, in part following reports that the U.S. Securities and Exchange Commission had begun inquiring about Musk's activity.

Tesla is facing a make-or-break moment in its eight-year history as a public company, as competition from European automakers is poised to intensify with new electric vehicles from Mercedes, Audi, BMW and other rivals.

Tesla has been targeted by short sellers - the hedge fund managers Jim Chanos and David Einhorn in particular - who are betting on the company's failure and, according to S3 partners, have lost more than $4.4 billion since January as Tesla's share price rose.

Both lawsuits accused Musk or Tesla of harming short sellers with false information.

He could also seek funding from sovereign wealth funds such as Saudi Arabia's, which has just taken a stake in Tesla estimated at between three percent and five percent.

However, the deal structure would come with big logistical and legal challenges when it comes to buying out smaller shareholders, analysts say.

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