A Major Short Seller Is Suing Elon Musk Over His Tweet About Taking Tesla Private

Tesla is a lemon and Elon Musk’s claim that he was taking it private was a fraudulent red herring, according to investor Andrew Left of Citron Research in a class action lawsuit filed yesterday against Musk and Tesla (tsla).

On August 7, Musk tweeted that he had secured funding to take Tesla private at an 18% premium. Stocks prices and trading volume rose dramatically. “Many Tesla short-sellers were forced to cover their positions at artificially high prices, losing approximately US$ 1.3bn in a single day,” Left writes in the suit.

The Securities and Exchange Commission began investigating Musk’s claim almost immediately. Reporters and investors began asking about the secured funding. Potential investors he’d mentioned, including the Saudi sovereign fund, would not confirm their interest. On August 17, Musk gave the New York Times an interview discussing how stressed he was feeling.

During that time, Tesla’s stock price fell, this time harming investors with conventional positions, the suit claims: “The truth regarding the supposedly ‘secure’ financing needed to effectuate the going-private transaction emerged in the succeeding days, exposing the fraudulent scheme and in the process injuring all Class Period investors as the price of Tesla securities deteriorated rapidly.”

On August 24, Musk announced he would not be trying to take Tesla private any more. The firm’s stock fell again and yesterday shares traded 27% below their August 7 high.