Tesla CEO Elon Musk Faces Shareholder Lawsuit for Alleged $7.5 Billion Insider Trading

The Tesla shareholder's lawsuit also accused the firm's directors of breaching their fiduciary duty by allowing CEO Elon Musk to sell the shares.

By Reuters | Updated: 1 June 2024 11:04 IST

Tesla CEO Elon Musk Faces Shareholder Lawsuit for Alleged $7.5 Billion Insider Trading

Photo Credit: Reuters

Elon Musk recently denied reports that the company was scrapping its cheaper electric car

Highlights

Tesla CEO Elon Musk faces a lawsuit over alleged insider trading
The shareholder has accused Musk of insider trading
The lawsuit asks the court to direct Elon Musk to return the profits

A Tesla shareholder filed a lawsuit on Thursday accusing CEO Elon Musk of insider trading when he sold over $7.5 billion of shares of the electric car maker in late 2022, saying the billionaire entrepreneur sold the shares before potentially disappointing production and delivery numbers were made public.

Shareholder Michael Perry, in the lawsuit filed in Delaware Chancery Court, said that Tesla's share price plummeted after the company's fourth-quarter numbers were made public on Jan. 2, 2023, and claimed that Musk "improperly benefited" by about $3 billion in insider profits.

"Musk exploited his position at Tesla, and he breached his fiduciary duties to Tesla," the lawsuit said, asking the court to direct Musk to return the profits made from the trades.

Samsung Wins Patent for a Tri-Fold Smartphone With Specialised Barrier Layer for Improved Durability

According to the lawsuit, Musk sold the shares on various dates in November 2022 and December 2022.

The lawsuit also accused Tesla's directors of breaching their fiduciary duty by allowing Musk to sell the shares.

Musk and Tesla did not immediately respond to a Reuters request for comment.

US FDA Clears Neuralink's Brain Chip Implant in Second Patient: Report

In the lawsuit, Perry said Musk - who in 2022 said demand for Tesla's vehicles was "excellent" - found out about the lower-than-expected numbers mid-November, with his access to real-time data, and sold his shares before the information was public.

Following news of vehicle price discounts that sparked demand concerns and the release of the numbers in January, Tesla's stock tanked.

"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 said.

Elon Musk's Neuralink Says Implant Had Issues After First Human Surgery

The lawsuit is the latest legal headache for Musk.

It comes as Musk faces opposition from some Tesla shareholders who are set to vote on June 13 on whether to ratify his $56 billion pay package, which a Delaware judge voided in January because she found he improperly controlled the process.

Tesla is incorporated in Delaware.

Musk is also in the middle of 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 said the U.S. Securities and Exchange Commission was trying to "harass" him through unwarranted investigations.

Elon Musk-Owned X Will Use Grok AI to Summarise News Events

Musk and the top U.S. markets regulator have been in a years-long feud, dating back to 2018, when he tweeted that he had "funding secured" to take Tesla private.

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

Is the Samsung Galaxy Z Flip 5 the best foldable phone you can buy in India right now? We discuss the company's new clamshell-style foldable handset on the latest episode of Orbital, the Gadgets 360 podcast. Orbital is available on Spotify, Gaana, JioSaavn, Google Podcasts, Apple Podcasts, Amazon Music and wherever you get your podcasts.

Affiliate links may be automatically generated - see our ethics statement for details.

Comments

For the latest tech news and reviews, follow Gadgets 360 on X, Facebook, WhatsApp, Threads and Google News. For the latest videos on gadgets and tech, subscribe to our YouTube channel. If you want to know everything about top influencers, follow our in-house Who'sThat360 on Instagram and YouTube.