Elon Musk, Tesla’s CEO, faced a lawsuit alleging insider trading after selling over $7.5 billion in company stock in late 2022. The shareholder claims that Musk sold the shares prior to the release of potentially discouraging production and delivery figures.
Shareholder Michael Perry filed a case in Delaware Chancery Court, alleging that Musk “improperly benefited” by roughly $3 billion in insider profits. Additionally, Perry claimed that Tesla’s share price fell following the release of the company’s fourth-quarter financial results on January 2, 2023.
The lawsuit claimed that Musk had “exploited his position at Tesla” and “breached his fiduciary duties to Tesla.” It asked the judge to order Musk to repay the trading proceeds.
The lawsuit claims that Musk sold the shares between November 2022 and December 2022 at different times.
The lawsuit further alleged that by permitting Musk to sell the shares, Tesla’s board had violated their fiduciary duties.
When Reuters asked for comments, Musk and Tesla did not answer right away.
According to Perry’s claim, Musk—who declared in 2022 that there was “excellent” demand for Tesla cars—sold his shares before the information became public in mid-November after learning about the lower-than-expected numbers using real-time data access.
Tesla’s stock fell precipitously when the statistics were revealed in January and reports of car pricing reductions that raised questions about demand surfaced.
“Had (Musk) waited to make these sales until after the release of material adverse news,… his sales would have netted him less than 55% of the amounts realized from his November and December 2022 sales,” the complaint stated.
The lawsuit is Musk’s most recent legal challenge.
Resistance to Musk from certain Tesla shareholders who will vote on June 13 on whether to approve his $56 billion compensation package coincides with a ruling by a Delaware judge in January. The judge ruled the compensation package unlawful due to improper process control.
Delaware is where Tesla is incorporated.
Additionally, Musk is currently under regulatory investigation to determine if he violated federal securities laws in 2022 by purchasing ownership in the social media company Twitter. Subsequently, he rebranded it as X. Musk claimed that unjustified probes by the U.S. Securities and Exchange Commission were an attempt to “harass” him.
Musk’s tweet in 2018 announcing he had “funding secured” to take Tesla private set off a years-long spat with the head of the U.S. markets regulator.
Musk is accused of cheating X investors in a different shareholder dispute by concealing his ownership of the social network business in order to accumulate shares at a discount.
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