Wilmington, Delaware – A Tesla investor filed a lawsuit in the Delaware Chancery Court accusing Elon Musk, CEO of Tesla, of using insider information to sell $7.5 billion worth of Tesla stock in 2022. The investor alleged that Musk knew Tesla would fall short of fourth-quarter expectations on vehicle deliveries and made significant stock sales before the information became public in January 2023.
The lawsuit claimed that Musk’s trades would have resulted in significantly lower profits if made after the quarterly results were disclosed to shareholders. It further alleged that Musk’s insider profits from the November and December sales amounted to approximately $3 billion based on the closing price of Tesla stock. Attorneys for both parties have not yet commented on the allegations.
The investor argued that Musk must have had access to non-public information about Tesla to make such timely stock sales. References were made to statements made by Musk in an earnings call regarding the company’s real-time update system on car orders and production figures, suggesting a possible source of insider information for the CEO.
Previous cases of insider trading involving high-profile figures like Larry Ellison, former CEO of Oracle, were highlighted as examples of legal action taken against executives for breaching their duties to shareholders. Such lawsuits are not uncommon, but outcomes can vary, with some cases resulting in settlements to avoid trial.
This is not Musk’s first brush with allegations of insider trading, as he currently faces a separate class-action lawsuit related to the manipulation of Dogecoin prices. Additionally, Musk is navigating legal challenges to retain a significant pay package and is considering relocating Tesla’s incorporation state from Delaware to Texas. Shareholders are set to vote on these matters in June 2023.
The lawsuit against Musk adds to the ongoing legal battles surrounding the billionaire entrepreneur, highlighting the complexities and controversies surrounding corporate governance and executive conduct. The outcome of these legal proceedings may have far-reaching implications for Musk, Tesla, and the broader business community. Investors and industry observers will be closely watching the developments as the case unfolds in the coming months.