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Tesla shareholder sues Musk over insider trading

Tesla shareholder sues Musk over insider trading

Shareholder Sues

Elon Musk is facing a new lawsuit accusing him of insider trading. The lawsuit was filed by Tesla shareholder Michael Perry in a Delaware court last week. Perry claims Musk sold nearly 45 million shares of Tesla stock in the fourth quarter of 2022.

This was before the company released disappointing sales data that caused the stock price to drop to a two-year low. The lawsuit states that Musk “exploited his position at Tesla and breached his fiduciary duties” by selling $7.5 billion worth of stock while he had “adverse, material non-public information.” Perry also accuses almost the entire Tesla board of violating their responsibilities to shareholders by allowing the sale. Unlike previous stock sales by Tesla insiders, these transactions were not part of a Rule 10b5-1 trading plan.

Such plans give the timing discretion to a third-party broker.

Musk faces insider trading allegations

Perry wants Musk’s alleged illegal gains of about $3 billion to be returned to Tesla.

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He is also seeking damages from all eight directors at the time for their “reckless disregard.”

The lawsuit argues that Musk knew Tesla’s fourth quarter performance would disappoint, despite his public statements about “excellent demand.” This was allegedly due to Tesla’s real-time data monitoring system that closely tracks every aspect of the business. Musk has said before that Tesla has some of the best real-time data of any company. He personally examines the results of each price change to balance production and demand.

The insider trading claims add to Musk’s growing list of legal challenges. This includes a recent ruling that voided his 2018 shareholder vote for a record compensation deal. Tesla is scheduled to re-run the vote at its June 13 annual meeting.

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