Tesla short sellers score after SEC sues Elon Musk

Elon Musk Tesla factory

Elon Musk Tesla factory

"I have always taken action in the best interests of truth, transparency and investors", Musk said. He writes that while Tesla wasn't named as a defendant in the lawsuit, it is a "potential serious blow" to the company, given the importance of Musk's leadership.

By Aug. 27, the first trading day after Musk said he was no longer attempting to take Tesla private, the stock had fallen to $319.44, which the SEC argues caused harm to investors who had purchased it during the period of "false and misleading statements".

"You can't make full disclosure in 280 characters", he said, referring to the length limit of a tweet.

In a statement to CNBC, Musk called the allegations "unjustified". Now the case looks set to go to court, another headache for Musk to deal with. The suit was almost avoided entirely but Musk reportedly pulled out of a settlement at the last minute.

Tesla was not immediately available for comment. Furthermore, the SEC believes the Tweets had a dramatic effect on Tesla's diminishing stocks, which in turn put a dent in the pockets of investors.

It's not clear whether Musk and Grimes are still together, but the two apparently unfollowed each other on Instagram at the end of last month. Musk has blamed short-sellers, investors betting on a collapse in a company's share price, for Tesla's woes. Nasdaq was forced to halt trading in Tesla stock, and for the next several hours Tesla's head of investor relations responded to inquiries by affirming "there is a firm offer" and Mr. Musk's tweet "is correct". The SEC alleges he did not have the funding secured.

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"Musk acknowledged that no specific deal terms had been established at the meeting and there was no discussion of what would or would not be considered reasonable".

'On August 6, Musk discussed a potential going-private transaction with a private equity fund partner with previous experience with such transactions, ' states the complaint. Later that day, the SEC held a press conference where co-director of enforcement Steven Peikin spoke specifically to reference the significance of Musk's chosen share buyback number.

Gordon Johnson, an analyst at Vertical Group who has been predicting a collapse in Tesla's shares for months, is less optimistic.

Musk recently smoked a marijuana joint during an interview.

That decision seems to be based on a few factors. Later in the month, Tesla announced that the go-private plan had been scrapped. Then they buy the shares back at a lower price and return them to the lenders, pocketing the profit.

Many have sent out an ill-advised tweet at least once in their lives, but Musk's joke about taking Tesla private at $420 a share could get him removed from the company.

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