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Elon Musk and his electric auto firm Tesla are being sued by investors who accuse them of concocting a scheme to "completely decimate" short-sellers.

In a letter to employees on Tuesday, Musk suggested a choice for shareholders of selling their shares for $420 each or remaining investors in a private Tesla. Einhorn holds a short position on Tesla shares through his hedge fund but it has cost him heavily this year: Greenlight's fund dropped 18.3 percent in the first half of this year, with Tesla being the second-largest contributor to those losses in the most recent quarter. His intention in taking the company private would be to protect Tesla from the distractions of share price volatility and pressure to meet quarterly financial targets, writes the BBC.

Tesla and the Securities and Exchange Commision declined comment on Thursday.

The transaction could amount to at least $50 billion if Musk keeps his 20 percent stake in the company. In particular, and importantly, at 12:48pm eastern standard time on August 7, 2018, Musk issued a statement via Twitter that "funding" for the deal had been "secured" ("Funding secured").

San Francisco attorney Joe Tabacco expressed his view that shareholders may actually have a viable claim against Tesla, according to Bloomberg. In their lawsuits, they have said that through his tweets, Musk has helped in inflating the share price artificially.

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The share fall has been fueled by investor skepticism over the deal's prospects and media reports that USA regulators are asking Tesla why Musk announced his plans on Twitter and whether his statement was truthful. "The market reaction shows Musk's statement by itself was material".

There's a nagging question on Wall Street after Tesla Inc.

Short sellers are investors who bet against a company and look for its stock price to go down.

Tesla is facing a make-or-break moment in its eight-year history as a public company, as competition from European automakers is poised to intensify with new electric vehicles from Mercedes, Audi, BMW and other rivals. The action was filed in the Northern District of California and is captioned Kalman Isaacs v. Elon Musk, et al.