1-6-2024 (TEXAS) A Tesla shareholder has filed a lawsuit against Elon Musk, accusing the CEO of insider trading when he sold over $7.5 billion worth of shares in the electric car maker towards the end of 2022. The lawsuit, filed on Thursday in the Delaware Chancery Court by shareholder Michael Perry, alleges that the billionaire entrepreneur sold the shares before potentially disappointing production and delivery numbers were made public.
According to the lawsuit, Musk’s share sale occurred on various dates in November and December 2022, with Tesla’s share price plummeting after the company’s fourth-quarter figures were released on January 2, 2023. Perry claims that Musk “improperly benefited” by about $3 billion in insider profits.
“Musk exploited his position at Tesla, and he breached his fiduciary duties to Tesla,” the lawsuit states, demanding that the court direct Musk to return the profits made from the trades.
The lawsuit further accuses Tesla’s directors of breaching their fiduciary duty by allowing Musk to sell the shares, despite his claims in 2022 that demand for Tesla’s vehicles was “excellent.”
Perry alleges that Musk, with his access to real-time data, became aware of the lower-than-expected numbers mid-November and subsequently sold his shares before the information became public knowledge. Following news of vehicle price discounts that sparked demand concerns and the release of the numbers in January, Tesla’s stock took a significant hit.
“Had (Musk) waited to make these sales until after the release of material adverse news,… his sales would have netted him less than 55 per cent of the amounts realized from his November and December 2022 sales,” the lawsuit states.
The insider trading lawsuit is the latest legal challenge for Musk, who is already facing opposition from some Tesla shareholders set to vote on June 13 on whether to ratify his $56 billion pay package, which a Delaware judge voided in January due to concerns over the process.
Additionally, Musk is in the midst of a regulatory probe to determine whether he broke federal securities laws in 2022 when he bought stock in the social media platform Twitter, which he later renamed X. Musk has accused the U.S. Securities and Exchange Commission of attempting to “harass” him through unwarranted investigations.
The feud between Musk and the top U.S. markets regulator dates back to 2018, when he tweeted that he had “funding secured” to take Tesla private, sparking legal action.
In a separate shareholder lawsuit, Musk has been accused of defrauding X investors by delaying the disclosure of his stake in the social media company to amass shares at lower prices.
