Tesla Shareholder Sues Elon Musk for Insider Trading Over Share Sale

A Tesla shareholder, Michael Perry, filed a lawsuit on Thursday accusing CEO Elon Musk of insider trading. Perry alleges that Musk sold over $7.5 billion worth of Tesla shares in late 2022 before potentially disappointing production and delivery numbers were made public.

Details of the Lawsuit:

The lawsuit in Delaware Chancery Court claims that Tesla’s share price plummeted after the company’s fourth-quarter numbers were made public on January 2, 2023. Perry asserts that Musk “improperly benefited” by about $3 billion in insider profits.

The suit states that Musk sold the shares on various dates in November and December 2022 and accuses Tesla’s directors of breaching their fiduciary duty by allowing these sales.

Claims of Breach of Fiduciary Duty:

According to the lawsuit, Musk exploited his position at Tesla and breached his fiduciary duties to the company. Perry seeks a court directive for Musk to return the profits made from these trades.

The suit further alleges that Musk was aware of lower-than-expected production and delivery numbers by mid-November 2022, thanks to his access to real-time data, and sold his shares before this information became public.

Impact on Tesla’s Stock Price:

Following news of vehicle price discounts and the subsequent release of disappointing January numbers, Tesla’s stock dropped significantly.

The lawsuit contends that if Musk had waited to sell his shares until after releasing this adverse information, his profits would have been less than 55% of the amounts realized from his November and December 2022 sales.

Ongoing Legal and Regulatory Challenges:

This lawsuit adds to Musk’s legal troubles. He is facing opposition from some Tesla shareholders over his $56 billion pay package, which a Delaware judge voided in January, finding that Musk improperly controlled the process. Shareholders are set to vote on ratifying this package on June 13.

Additionally, Musk is under a regulatory probe to determine if he broke federal securities laws in 2022 when he bought stock in Twitter, later renamed X.

Musk has accused the U.S. Securities and Exchange Commission of harassment through unwarranted investigations, a feud dating back to his 2018 tweet about including “funding secured” to take Tesla private.

Another shareholder lawsuit claims Musk defrauded X investors by delaying the disclosure of his stake in the social media company to buy shares at lower prices. Musk and Tesla have not responded to Reuters’ demands for comment regarding the lawsuit.