Tesla Plaintiff Calls Musk's Latest Blog Post a 'Confession'

August 13, 2018

By Hope King

Elon Musk’s latest blog post did nothing but strengthen Will Chamberlain’s position that the Tesla CEO’s tweets from last week were fraudulent.

“It was almost a confession that he committed securities fraud,” Chamberlain told Cheddar on Monday.

Chamberlain is a plaintiff in a class-action suit against Tesla and Musk. The suit was filed Friday afternoon in the U.S. District Court for the Northern District of California and claims that Tesla and its CEO violated the Securities Exchange Act of 1934 by making allegedly false and misleading statements to defraud Tesla investors. Reed Katherein, the attorney for Chamberlain, agreed that Musk’s blog post read almost as a confession.

“It’s pretty clear that funding was not secured and that he did not have a reasonable basis for saying funding was secured,” Kathrein said.

In his post, Musk said the Saudi sovereign wealth fund had "approached me multiple times about taking Tesla private," and that the Saudi's interest in the company gave him the confidence to announce last week that he had "secured" the necessary financing to take the company private. "Obviously, the Saudi sovereign fund has more than enough capital needed to execute on such a transaction," Musk said.

Musk has come under increasing pressure to prove that a tweet he posted last Tuesday announcing the CEO’s intention to take the company private at $420 a share was based on some kind of firm commitment from outside investors.

The tweet included very specific language that is the target of an SEC inquiry and two class-action lawsuits: “Funding secured.”

In his post, Musk said that he had met with Saudi investors on July 31 of this year. "I left the July 31st meeting with no question that a deal with the Saudi sovereign fund could be closed, and that it was just a matter of getting the process moving," he wrote. "This is why I referred to 'funding secured' in the August 7th announcement."

Kathrein, who says he has not been contacted by the company ー nor by Musk ー believes the tweet was intended to drive short sellers like his client to cover their positions.

“To me, he is playing with fire,” said Kathrein, a partner at the law firm Hagens Berman. “That does not justify putting out this tweet that says funding is secured.”

Musk’s contentious relationship with short sellers is both well-documented and publicized. One recent example took place in June when he tweeted to his 22 million followers that short sellers have “about three weeks before their short position explodes.”

Chamberlain, who said his short position is made up of about 80 percent common stock short and 20 percent puts, reduced his position as a result of the tweet.

In an interview with Cheddar on Sunday, Chamberlain ー a lawyer who previously practiced with the Competitive Enterprise Institute’s Center for Class Action Fairness ー said he covered his position because he had to take the tweet seriously.

Musk is the "CEO of a publicly traded company," he said. "I have to hedge against the risk that he has not committed securities fraud. That seems like a reasonable thing to do."

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