A Tesla shareholder filed a lawsuit Thursday accusing CEO Elon Musk of insider trading when he sold more than $7.5 billion worth of the electric carmaker’s stock in late 2022. Musk allegedly sold the shares before potentially disappointing production and delivery figures were made public.
Shareholder Michael Perry said in the lawsuit filed in Delaware court that Tesla’s stock price plummeted after the company’s fourth-quarter earnings were released on Jan. 2, 2023. He also alleged that Musk “improperly profited” from about $3 billion in insider profits.
“Musk exploited his position at Tesla and breached his fiduciary duties to Tesla,” the lawsuit says, asking the court to order Musk to repay the profits he made from the transactions.
According to the indictment, Musk sold the shares on various dates in November 2022 and December 2022.
The lawsuit also accused Tesla directors of breaching their fiduciary duty by allowing Musk to sell the shares.
Musk and Tesla did not immediately respond to a Reuters request for comment.
Perry alleges in the lawsuit that Musk — who said in 2022 that demand for Tesla vehicles was “excellent” — knew about the lower-than-expected numbers in mid-November, thanks to his access to real-time data, and sold his shares before the information became public.
After news of price cuts on vehicles sparked concerns about demand, and after the January earnings release, Tesla’s stock price plummeted.
“If (Musk) had waited to make these sales until material adverse news had emerged, his sales would have earned him less than 55% of the amounts he earned in November and December 2022,” the lawsuit said.
The lawsuit is yet another legal headache for Musk.
Musk is now facing opposition from some Tesla shareholders who will vote on June 13 to ratify his $56 billion pay package, which a Delaware judge threw out in January after finding that Musk had improperly managed the process.
Tesla is incorporated in Delaware.
Musk is also facing a regulatory investigation into whether he violated federal securities laws in 2022 when he bought shares in social media platform Twitter, which he later renamed X. Musk said the U.S. Securities and Exchange Commission was trying to “harass” him through unwarranted investigations.
Musk and the US regulator have been at odds for years, starting in 2018 when Musk tweeted that he had “secured funding” to take Tesla private.
Musk has been charged in a separate shareholder lawsuit with defrauding Type X investors by delaying the disclosure of his stake in the social media company so he could acquire shares at lower prices.
© Thomson Reuters 2024
