New York: A Tesla shareholder has initiated legal action against CEO Elon Musk, alleging insider trading amounting to over $7.5 billion. The lawsuit, filed in Delaware Chancery Court by Michael Perry, contends that Musk sold shares of the electric car manufacturer before the disclosure of potentially disappointing production and delivery figures, resulting in substantial profits.
The lawsuit asserts that Tesla’s stock price experienced a sharp decline following the public release of fourth-quarter numbers on January 2, 2023. Perry claims that Musk unfairly profited by approximately $3 billion from insider trading activities.
“Musk exploited his position at Tesla, and he breached his fiduciary duties to Tesla,” the lawsuit states, seeking restitution of the profits derived from the trades.
According to the legal filing, Musk conducted the sales on various dates in November and December 2022. Additionally, the lawsuit implicates Tesla’s directors for failing in their fiduciary duty by permitting Musk to execute the share sales.
According to a Reuters report, neither Musk nor Tesla has immediately responded to requests for comment regarding the lawsuit.
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Perry alleges that Musk, despite previously asserting robust demand for Tesla vehicles in 2022, was aware of lower-than-expected figures by mid-November, owing to his access to real-time data. He purportedly sold his shares ahead of the public disclosure of this information.
Following revelations of vehicle price reductions and the subsequent release of figures in January, Tesla’s stock witnessed a significant decline. The lawsuit contends that had Musk delayed his sales until after the dissemination of adverse news, his profits would have been considerably lower than those realized from transactions in November and December 2022.
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This legal action adds to Musk’s existing challenges. Amidst opposition from Tesla shareholders set to vote on June 13 regarding the ratification of his $56 billion compensation package, which a Delaware judge nullified in January, Musk faces additional scrutiny over his 2022 stock acquisition in Twitter, later rebranded as X. Musk has criticized the U.S. Securities and Exchange Commission’s probe as unwarranted harassment.
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Musk’s contentious relationship with the top U.S. markets regulator dates back to 2018 when he tweeted about having secured funding to take Tesla private. Another shareholder lawsuit alleges that Musk deceived X investors by delaying the disclosure of his stake in the social media company to accumulate shares at reduced prices.
