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

Tesla CEO Elon Musk finds himself in the midst of a major legal battle as he faces a shareholder lawsuit alleging insider trading amounting to $7.5 billion. Join us as we delve into the details of this unfolding scandal, examining the allegations, implications, and potential repercussions for Musk and Tesla. Stay informed with this comprehensive coverage of the lawsuit against one of the most influential figures in the tech industry.

Technology Jun 1, 2024 0 25 Add to Reading List

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

Tesla CEO Elon Musk is facing a shareholder lawsuit for allegedly engaging in $7.5 billion insider trading.

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

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

The lawsuit states, "Musk exploited his position at Tesla, and he breached his fiduciary duties to Tesla," and requests the court to direct Musk to return the profits generated from the trades.

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

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

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

In the lawsuit, Perry asserted that Musk, who had stated in 2022 that demand for Tesla's vehicles was "excellent," learned about the lower-than-expected numbers in mid-November through his access to real-time data. Perry alleges that Musk sold his shares before this information became public.

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

"If Musk had 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 stated.

The lawsuit is the latest legal challenge for Musk.

This development coincides with Musk encountering resistance from certain Tesla shareholders, who are scheduled to vote on June 13 regarding the ratification of his $56 billion pay package. This package was invalidated by a Delaware judge in January due to her determination that Musk improperly controlled the process.

Musk is also currently under investigation by regulators to ascertain whether he violated federal securities laws in 2022 by purchasing stock in the social media platform Twitter, subsequently renamed X. Musk alleged that the U.S. Securities and Exchange Commission was attempting to "harass" him through unjustified investigations.

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

Additionally, a separate shareholder lawsuit has alleged that Musk defrauded X investors by postponing the disclosure of his stake in the social media company to accumulate shares at lower prices.