A Tesla shareholder has filed a lawsuit accusing CEO Elon Musk of insider trading, alleging that Musk sold over $7.5 billion of Tesla shares in late 2022 before the company revealed potentially disappointing production and delivery numbers.
The lawsuit, filed by shareholder Michael Perry in Delaware Chancery Court, claims that Tesla’s share price plummeted after the company disclosed its fourth-quarter numbers on January 2, 2023. Perry asserts that Musk improperly benefited by about $3 billion in insider profits.
The lawsuit accuses Musk of exploiting his position at Tesla and breaching his fiduciary duties to the company. Perry demands that the court direct Musk to return the profits from the trades. According to the lawsuit, Musk sold the shares on various dates in November and December 2022.
Perry also alleges that Tesla’s directors breached their fiduciary duty by allowing Musk to sell the shares. Neither Musk nor Tesla immediately responded to a Reuters request for comment.
In the lawsuit, Perry states that Musk, who claimed in 2022 that demand for Tesla’s vehicles was “excellent,” discovered the lower-than-expected numbers in mid-November through his access to real-time data and sold his shares before the information became public.
Following news of vehicle price discounts that sparked demand concerns and the release of the numbers in January, Tesla’s stock plummeted. Perry argues that if Musk had waited to make these sales until after the release of the adverse news, his sales would have netted him less than 55% of the amounts realized from his November and December 2022 sales.
This lawsuit adds to Musk’s ongoing legal challenges. Musk faces opposition from some Tesla shareholders, who are set to vote on June 13 on whether to ratify his $56 billion pay package. In January, a Delaware judge voided this pay package, finding that Musk improperly controlled the process. Tesla is incorporated in Delaware.
Musk is also under a regulatory probe to determine whether he broke federal securities laws in 2022 when he bought stock in social media platform Twitter, which he later renamed X. Musk claims that the U.S. Securities and Exchange Commission is trying to “harass” him through unwarranted investigations.
Musk and the top U.S. markets regulator have been in a years-long feud, dating back to 2018 when Musk tweeted that he had “funding secured” to take Tesla private. A separate shareholder lawsuit accuses Musk of defrauding X investors by delaying the disclosure of his stake in the social media company to amass shares at lower prices.
