Tesla shareholder sues Elon Musk for alleged $7.5 billion insider trading

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Tesla shareholder sues Elon Musk
  • Currently, two Tesla shareholders have sued Tesla founder Elon Musk.Tesla shareholder sues Elon Musk:-
A Tesla shareholder on Thursday sued CEO Elon Musk accusing him of insider trading after he sold more than $7.5 billion worth of the electric car maker’s shares due in late 2022, saying the billionaire entrepreneur sold shares before potentially disappointing production and delivery numbers were made public.

Shareholder Michael Perry, in the suit filed in Delaware Chancery Court, said Tesla’s stock price dropped sharply after the company’s fourth-quarter figures were made public on Jan. 2, 2023, and claimed Musk “improperly benefited” from nearly $3 billion in insider profits.

“Musk abused his position at Tesla and he violated his ethical duties to Tesla,” the lawsuit says. The lawsuit asks the court to order Musk to return the profits he earned from the business.

According to the lawsuit, Musk sold the shares on different dates in November 2022 and December 2022. The lawsuit also accused Tesla directors of breaching their duty by allowing Musk to sell the shares. Musk and Tesla did not immediately respond to Reuters’ request for comment.

In the lawsuit, Perry said Musk — who had said in 2022 that demand for Tesla’s vehicles was “excellent” — learned of the lower-than-expected numbers in mid-November with access to real-time data, and sold his shares before the information became public.

News of vehicle price discounts raised demand concerns and Tesla shares fell sharply after the January data was released.

“If (Musk) had waited to make these sales until after the adverse news was released, … his sales would have yielded him less than 55% of the proceeds of his November and December 2022 sales,” the lawsuit says.

The suit is the latest legal headache for Musk. It comes as he faces opposition from some Tesla shareholders who are set to vote on June 13 to approve his $56 billion pay package, which a Delaware judge struck down in January because he felt he improperly handled the process.

Tesla is incorporated in Delaware. Musk is also in the midst of a regulatory investigation to determine whether he violated federal securities laws by buying stock in social media platform Twitter in 2022, which he later renamed X. Musk said the US Securities and Exchange Commission was trying to “harass” him through improper investigations.

Musk and the top US market regulator have been locked in a years-long dispute, beginning in 2018 when he tweeted that he had “funding secured” to take Tesla private.

Also read: Tesla’s troubles increase, electric vehicle giant will recall 1.25 lakh cars in America

A separate shareholder lawsuit accuses Musk of defrauding X investors by delaying disclosure of his stake in the social media company in order to buy shares at lower prices.

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