Tesla CEO Musk accused of defrauding shareholders, sued by investors

Elon Musk founder CEO and lead designer at SpaceX and co-founder of Tesla speaks at the International Space Station Research and Development Conference in Washington US

Elon Musk founder CEO and lead designer at SpaceX and co-founder of Tesla speaks at the International Space Station Research and Development Conference in Washington US

The complaint alleges violations of USA securities law and was filed Friday as a class action in federal court in San Francisco.

All Musk said in his Tuesday tweet about taking the company private was that the financing for the deal was "secured". "Funding Secured." The stock initially shot up 11 per cent to nearly $380.

They have cited as evidence Musk's tweet that came on August 7 and the very next day, Tesla shares went up by around 13%.

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The Twitter comments could potentially affect Musk's legal situation.

The lawsuits filed by Isaacs and William Chamberlain said Musk's and Tesla's conduct artificially inflated Tesla's stock price and violated federal securities laws.

The 47-year-old investor and engineer stunned financial markets on Tuesday when he said on Twitter that he was considering a take-private deal for Tesla, an auto manufacturing pioneer that developed the world's first luxury all-electric sedan vehicle.

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Isaacs claims that Tesla's volatility on Wall Street after the Twitter storm has cost shareholders shorting the stock hundreds of millions of dollars, and caused all Tesla securities purchasers to pay inflated prices over the three-day period leading up to Friday 10 August.

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. While the entrepreneur owns 20% of Tesla, more than $60 billion would be needed to buy the business from public shareholders. "It looks like the large short sellers are holding onto their positions", and increasing the positions at the stock's higher level, he said. "The market reaction shows Musk's statement by itself was material". Speculation had been swirling around Tesla and Musk's disclosures amid the yearlong struggle the company had ramping up production of the Model 3 sedan, with Musk fielding a question on the company's latest earnings call about whether a notice from a regulator was keeping him from being able to raise more capital. A Musk investigation might be a best-case scenario for Tesla shorts, but CNBC's Jim Cramer said an investigation is a longshot.

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