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Short-Sellers Sue Tesla After Musk's 'Going Private' Tweets (bbc.co.uk)
An anonymous reader quotes the BBC:
Elon Musk's bombshell announcement that he is thinking of taking the electric car company Tesla private has landed him a lawsuit from unhappy investors.... His comments caused the share price to shoot up 11% to nearly $380, though it has since fallen back. Short-sellers, who bet on share price falls, allege he misled the market....
Short-sellers, who make a profit by borrowing shares, selling them and then buying them back at an expected lower price, claim to have lost millions thanks to Mr Musk's comments. Plaintiff Kalman Isaacs alleges the announcement was aimed at "completely decimating" short-sellers. His lawsuit, and another filed by William Chamberlain, accuse Mr Musk and Tesla of violating federal securities laws and artificially inflating Tesla's share price. Neither Mr Musk nor Tesla have commented on the lawsuit, which was filed in a federal court in San Francisco.
Tesla "is holding early discussions with banks about the feasibility and structure of a possible deal," Bloomberg reported yesterday -- and Ars Technica points out that if Mr. Isaacs had simply kept his short positions open through Friday, "he would be at least $60,000 richer."
But Isaacs' hopes to be the lead plaintiff for a class-action lawsuit "representing all Tesla shareholders who traded after Musk's tweet on Tuesday or at any time on Wednesday."
Short-sellers, who make a profit by borrowing shares, selling them and then buying them back at an expected lower price, claim to have lost millions thanks to Mr Musk's comments. Plaintiff Kalman Isaacs alleges the announcement was aimed at "completely decimating" short-sellers. His lawsuit, and another filed by William Chamberlain, accuse Mr Musk and Tesla of violating federal securities laws and artificially inflating Tesla's share price. Neither Mr Musk nor Tesla have commented on the lawsuit, which was filed in a federal court in San Francisco.
Tesla "is holding early discussions with banks about the feasibility and structure of a possible deal," Bloomberg reported yesterday -- and Ars Technica points out that if Mr. Isaacs had simply kept his short positions open through Friday, "he would be at least $60,000 richer."
But Isaacs' hopes to be the lead plaintiff for a class-action lawsuit "representing all Tesla shareholders who traded after Musk's tweet on Tuesday or at any time on Wednesday."
i made a investment and it didn't pan out. guess i'd better sue
This is a trick that Elon Musk can only pull once. If he doesn't take the company private, his move will be seen for what it was, a desperate attempt to shore up stock price by putting out the rumor that he was "thinking about" doing something.
If the company doesn't go private, those short-sellers will have their revenge. Consider: If you were thinking about taking a company private (which means buying up stock), would you make an announcement that will raise the price of the stock so you have to pay more?
Musk is trying to buy time for Tesla. That's cool, but he's skirting a fine line. It'll be interesting to see how this plays out, but I assure you there are people at the SEC looking into it.
You are welcome on my lawn.
There's this big obvious income source coming for the company, an expensive factory being made that will make the next technology that everyone wants.
Without a disinformation campaign, folks would see that income source, and trade to match expected values, tempered for obvious risks, like failure rates and competition.
So, how do you turn this big, obvious market event in your favor?
You spread as much garbage about the company as you can. Headlines - headlines everywhere about everything you can get anyone to believe, that the company is fated for a giant fall. Get those stocks to as low a value as you can - then buy them, just before the actual numbers come back about a factory doing what a factory does.
So... the guy in charge of said factory decides to make the thing private, to prevent your strategy from working! Aw! All that work trashing the company, and you can't benefit from it! Such a loss of potential!
That's the market, as it is currently allowed to function. Folks using every piece of information as pivots to fool other investors.
The same thing is happening with Square Enix - about to release like 5 major games after working several years on each, and just releasing another major game now. What do the stories say about this, just before?
https://wccftech.com/square-en...
That's right - they emphasize the losses from making those games. They want those values low, low, low.
It's kind of a stupid way to value things, isn't it?
Ryan Fenton
Musk has to keep the price above $360/share, otherwise he has to pay back bondholders $960M in cash by March 1st, 2019. Based on its current cash position and expected expenditures Tesla wont have the funds to pay bondholders back.
https://seekingalpha.com/article/4196101-elon-musk-desperately-needs-tesla-stock-stay-360
The shorts have borrowed shares and sold them. Their problem is they have to buy them back to return them and they were hoping the price would go down so they could pocket the difference. This isn't investment, it is parasitism. They gambled and the share price hasn't gone down, that's life.
Share prices rise and fall on all sorts of information and I don't think Musk would have said what he did without having the finance secured and his tweet was to alert all of his actual investors of what he was planning. Shorts aren't in on this, they don't have any shares.
"I have the attention span of a strobe lit goldfish, please get to the point quickly!"
The shorts weren't worse off than before the tweet... unless they were short so much that they got a margin call before the price came back down, in which case they deserve to lose for having such a massive position.