Tesla Shareholder Sues Elon Musk for Insider Trading Over $7.5 Billion Stock Sale

The lawsuit states that Tesla's share price plummeted after the company's fourth-quarter numbers were made public on January 2, 2023.

A Tesla shareholder filed a lawsuit on Thursday accusing CEO Elon Musk of insider trading, alleging he sold over $7.5 billion of Tesla shares in late 2022 before potentially disappointing production and delivery numbers were disclosed.

Shareholder Michael Perry filed the suit in Delaware Chancery Court, claiming Musk “improperly benefited” by about $3 billion in insider profits due to his privileged position and access to non-public information.

The lawsuit states that Tesla’s share price plummeted after the company’s fourth-quarter numbers were made public on January 2, 2023.

Perry alleges that Musk sold the shares on various dates in November and December 2022, before the lower-than-expected production numbers were released.

“Musk exploited his position at Tesla, and he breached his fiduciary duties to Tesla,” the lawsuit states, urging the court to compel Musk to return the profits made from these trades.

Additionally, the lawsuit accuses Tesla’s directors of breaching their fiduciary duty by allowing Musk to sell the shares. Neither Musk nor Tesla immediately responded to Reuters’ request for comment.

Perry’s lawsuit also highlights that Musk had claimed in 2022 that demand for Tesla’s vehicles was “excellent,” but by mid-November, he was aware of the lower-than-expected numbers due to his access to real-time data.

Following news of vehicle price discounts and the release of the production numbers in January, Tesla’s stock significantly dropped.

“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 claims.

This lawsuit adds to Musk’s legal challenges, as he 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 due to improper control over the process. Tesla is incorporated in Delaware.

Musk is also under a regulatory probe to determine if he violated federal securities laws in 2022 when he bought stock in Twitter, which he later renamed X.

Musk has accused the U.S. Securities and Exchange Commission of “harassing” him through unwarranted investigations.

This feud with the SEC dates back to 2018 when Musk tweeted about having “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, allowing him to buy shares at lower prices.