A Tesla shareholder has filed a lawsuit against CEO Elon Musk, accusing him of insider trading by selling over $7.5 billion worth of Tesla shares in late 2022. The lawsuit, lodged by shareholder Michael Perry in Delaware Chancery Court on Thursday, claims Musk sold the shares before the public release of potentially disappointing production and delivery numbers.
The lawsuit asserts that Tesla’s share price dropped significantly after the company disclosed its fourth-quarter figures on January 2, 2023. Perry alleges that Musk “improperly benefited” from insider knowledge, pocketing approximately $3 billion in profits from the trades.
“Musk exploited his position at Tesla, and he breached his fiduciary duties to Tesla,” the lawsuit contends, seeking a court order for Musk to return the profits made from these transactions.
According to the filing, Musk executed these sales on multiple occasions in November and December 2022. The lawsuit further implicates Tesla’s board of directors, accusing them of failing their fiduciary duty by permitting Musk to offload his shares.
Neither Musk nor Tesla immediately responded to Reuters’ requests for comment.
Perry’s lawsuit claims that despite Musk’s public assurances in 2022 that demand for Tesla vehicles was “excellent,” he became aware of the lower-than-expected production numbers in mid-November via real-time data access. Subsequently, he sold his shares before this adverse information was made public. The stock’s value plummeted following news of vehicle price discounts and the January release of the production figures.
“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 lawsuit states.
This legal challenge adds to Musk’s mounting issues. He faces opposition from some Tesla shareholders set to vote on June 13 regarding his $56 billion compensation package, which a Delaware judge nullified in January, citing improper control over the process by Musk.
Additionally, Musk is entangled in a regulatory probe to ascertain whether he violated federal securities laws in 2022 during his acquisition of Twitter shares, a platform he later renamed X. Musk has accused the U.S. Securities and Exchange Commission (SEC) of “harassing” him with baseless investigations.
Musk’s contentious history with the SEC dates back to 2018 when he controversially tweeted about securing funding to take Tesla private, sparking a protracted feud with the regulator. Furthermore, a separate shareholder lawsuit accuses Musk of defrauding X investors by delaying the disclosure of his stake in the social media company, enabling him to buy shares at lower prices.
As these legal battles unfold, Musk’s leadership and actions remain under intense scrutiny, potentially impacting both his personal finances and Tesla’s corporate governance.