Key Points:
- Tesla shareholder Michael Perry accuses Elon Musk of insider trading for selling $7.5 billion in shares before disappointing production figures were released.
- The lawsuit claims Musk breached fiduciary duties and improperly benefited by $3 billion, with Tesla’s directors also accused of allowing the sales.
- Tesla’s stock price plummeted following the release of Q4 numbers in January 2023, further fueling the lawsuit.
- Musk faces multiple legal issues, including opposition to his $56 billion pay package and an SEC investigation into his 2022 stock acquisitions.
A Tesla shareholder has filed a lawsuit against CEO Elon Musk, accusing him of insider trading regarding selling over $7.5 billion of Tesla shares in late 2022. The lawsuit, brought by shareholder Michael Perry in Delaware Chancery Court, claims Musk sold the shares before the public release of potentially disappointing production and delivery figures, which caused Tesla’s stock price to plummet in early 2023. Perry alleges that Musk “improperly benefited” by approximately $3 billion in insider profits.
The lawsuit states that Tesla’s fourth-quarter numbers made public on January 2, 2023, led to a significant drop in the company’s share price. Perry contends that Musk exploited his position at Tesla and breached his fiduciary duties by selling shares before disclosing this adverse information. The suit requests that the court direct Musk to return the profits made from these trades.
According to the lawsuit, Musk sold the shares in November and December 2022. It also accuses Tesla’s directors of breaching their fiduciary duty by allowing Musk to execute these sales.
In mid-November 2022, Musk reportedly became aware of lower-than-expected production and delivery numbers despite publicly stating that demand for Tesla vehicles was “excellent.” The lawsuit argues that Musk used his access to real-time data to sell shares before the disappointing figures were released. After news of vehicle price discounts and the release of the Q4 numbers in January, Tesla’s stock price declined sharply.
This lawsuit adds to Musk’s legal challenges. Musk is also facing opposition from some Tesla shareholders who are set to vote on June 13 on whether to ratify his $56 billion pay package. A Delaware judge previously voided this package in January, finding that Musk improperly controlled the process. Tesla is incorporated in Delaware, giving the state’s courts jurisdiction over these matters.
Additionally, Musk is under regulatory scrutiny regarding potential violations of federal securities laws in 2022 when he acquired stock in Twitter, which he later renamed X. Musk has accused the U.S. Securities and Exchange Commission (SEC) of harassment through unwarranted investigations. The ongoing feud between Musk and the SEC dates back to 2018, when he tweeted about having “funding secured” to take Tesla private, leading to further legal and regulatory battles.
In a related development, another shareholder lawsuit accuses Musk of defrauding X investors by delaying the disclosure of his stake in the social media company, allowing him to purchase shares at lower prices.
