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Tesla investors angered at Musk's $420 lowball deal

Elon Musk  - AAP
Elon Musk - AAP

Elon Musk’s Tesla buyout plan has hit the skids after investors criticised the billionaire for trying to take it private on the cheap.

One leading shareholder said the company could be worth four times more than Mr Musk said he was planning to bid.

“When you are investing on a 10-year timeline you can’t put a single value on something … If Tesla does become dominant in autonomous driving or electric vehicles, the value could be three or four times $420,” the investor said.

They are extremely angry at $420. They’re frustrated because they have belief in Tesla and have held on despite all the shorting

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A Tesla investor

One source with knowledge of several investors’ thinking said: “They are extremely angry at $420. They’re frustrated because they have held on and believe Tesla could be worth as much as $800.”

Mr Musk’s surprise decision to reveal the plan on Twitter also raises ­legal concerns, with US regulator the Securities and Exchange Commission understood to be investigating whether he breached rules in a way that could be seen as market manipulation.

Doug Davison, a lawyer at Linklaters, said: “There are a lot of governance issues. If it was a legitimate significant material development, Tesla would be required to file [regulatory documents] within four days. No one is sure if he has funding secured.”

Two shareholders have already launched legal claims against Mr Musk and Tesla over the tweet.

Investor Kalman Isaacs has filed a class action in federal court in San Francisco calling the statement "materially misleading".

“Mr Musk’s statement that he had secured funding was especially material and significantly moved the market,” the complaint read.

“Because Mr Musk has not secured financing, and has issued false and materially misleading information into the market, short-sellers of Tesla stock were forced to cover their positions by purchasing shares at artificially inflated prices... all purchasers of Tesla securities were injured as well.”

A second claim has been started by William Chamberlain, alleging that Tesla's shares were artificially lifted by the announcement and US securities rule had been breached.

Speculators have piled into “short-selling” Tesla shares, betting that the stock will fall, a decline which will net them big profits.

Tesla shares spiked after Musk's tweet, potentially hitting short-sellers with major losses.

Individuals and institutional investors own more than 70pc of the shares. Mr Musk has 20pc.