Elon Musk Faces $7.5B Insider Trading Allegation From Tesla Shareholder

Tesla Inc. TSLA shareholder Michael Perry on Thursday filed a lawsuit against Elon Musk alleging insider trading when the CEO sold shares worth over $7.5 billion in the last two months of 2022.

What Happened: The lawsuit, filed by Perry in the Delaware Chancery Court, claims that Musk sold a total of over $7.5 billion worth of Tesla shares in late 2022 before the disclosure of disappointing fourth-quarter production and delivery numbers. Perry alleges that Musk, using his access to real-time data, was aware of the lower-than-expected numbers when he sold shares worth $3.95 billion in November 2022 and shares worth $3.58 billion in December 2022.

Tesla publicly unveiled delivery numbers on Jan. 2, 2023, and Tesla’s stock fell to $108.10 on Jan. 3, down from the $123.18 it closed at on Dec. 30, the lawsuit noted, pegging Musk’s “insider profits” for the aforementioned share sales at about $3 billion.

“Musk profited from his misconduct and his exploitation of material and adverse inside information,” the lawsuit said.

“Had he waited to make these sales until after the release of material adverse news regarding TSLA discounts, sales, orders, and deliveries on Jan. 2, 2023, his sales would have netted him less than 55% of the amounts realized from his November and December 2022 sales.”

The lawsuit also accused then-Tesla directors of breach of fiduciary duty of loyalty for allowing Musk’s sales and is seeking a directive from the court that all profits obtained from these share sales be returned.

Why It Matters: The lawsuit is the latest of legal hurdles for the EV giant.

Earlier this year, a Delaware court rescinded Musk’s 2018 pay package, worth $56 billion at the time of award, terming it an “unfathomable sum.” Tesla's board is trying to have it reinstated by a shareholder vote yet again in June. The company is also attempting to move Tesla’s state of incorporation from Delaware to Texas and is currently waiting on the results of a shareholder vote on the proposal, expected to be announced on June 13.

Musk is also being probed by the Securities and Exchanges Commission for potential federal securities law violations during his acquisition of Twitter, now called X.

Tesla did not immediately respond to Benzinga‘s request for comment on the new lawsuit against its CEO.

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