Tesla Investor Sues Elon Musk Over $7.5 Billion Stock Sale

Claims of Insider Trading as Musk Allegedly Sold Shares Before Disappointing Results Released

Jun 1, 2024 - 01:44
Jun 1, 2024 - 01:44
Tesla Investor Sues Elon Musk Over $7.5 Billion Stock Sale
Tesla Investor Sues Elon Musk Over $7.5 Billion Stock Sale

A Tesla investor has filed a lawsuit against CEO Elon Musk, accusing him of insider trading by selling over $7.5 billion in Tesla shares in late 2022, just before the company announced disappointing production and delivery numbers.

Shareholder Michael Perry filed the lawsuit in Delaware Chancery Court, claiming that Tesla's stock price plummeted after the company's fourth-quarter results were released on January 2, 2023. Perry alleges that Musk gained about $3 billion in illegal profits by selling his shares before this information was publicly disclosed.

"Musk exploited his position at Tesla and breached his fiduciary duties," the lawsuit states, demanding that Musk return the profits from these transactions.

The complaint indicates that Musk sold shares on various dates in November and December 2022. It also accuses Tesla's directors of neglecting their duties by allowing these sales.

Requests for comment from Musk and Tesla were not immediately answered.

Perry claims that Musk, who had access to real-time data, knew about the lower production numbers by mid-November. Despite publicly asserting that demand for Tesla vehicles was "excellent," Musk allegedly sold his shares before the bad news was made public.

Tesla's stock fell following the announcement of vehicle price cuts and the release of the lower production numbers in January.

The lawsuit argues that if Musk had waited to sell his shares until after the adverse news was announced, he would have made less than 55% of what he did by selling in November and December.

This lawsuit is among several legal challenges Musk is facing. He is also dealing with opposition from Tesla shareholders regarding his $56 billion pay package, which a Delaware judge voided in January due to improper control over the approval process.

Additionally, Musk is under investigation for potential federal securities law violations related to his purchase of stock in Twitter, now known as X. Musk has accused the U.S. Securities and Exchange Commission of harassing him with unwarranted investigations.

Musk's ongoing conflict with the SEC dates back to 2018, when he tweeted about having "funding secured" to take Tesla private.

In another lawsuit, different shareholders have accused Musk of defrauding investors by delaying the disclosure of his stake in Twitter, allowing him to buy shares at lower prices.

Also Read: Tesla Shareholders Unite Against Elon Musk's $40 Billion Compensation Package

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