A Tesla shareholder filed a lawsuit on Thursday accusing Chief Executive Elon Musk of selling more than $7.5 billion worth of stock in the electric car maker in late 2022, saying the billionaire entrepreneur sold the shares ahead of potentially disappointing production and delivery data.
Shareholder Michael Perry said in a lawsuit filed in the Delaware Chancery Court that Tesla’s stock price plummeted after it released fourth-quarter data on January 2, 2023, and claimed that Musk “unjustly benefited” from about $3 billion in insider profits.
The lawsuit alleges that “Musk exploited his position at Tesla and breached his fiduciary duty to Tesla” and asks the court to direct Musk to return the profits he made from the deal.
According to the lawsuit, Musk sold the shares on various dates in November and December 2022.
The lawsuit also accuses Tesla directors of breaching their fiduciary duties by allowing Musk to sell stock.
Musk and Tesla did not immediately respond to Reuters’ request for comment.
Perry said in the lawsuit that Musk, who said demand for Tesla vehicles was “very good” in 2022, discovered the lower-than-expected numbers by accessing real-time data in mid-November and sold his stock before the information became public.
Tesla shares tumbled after news of car price discounts sparked demand concerns and after January data was released.
“Had (Musk) waited until material adverse news was released to make these sales, … his sales revenue would have been less than 55% of his November and December 2022 sales revenue,” the lawsuit states.
The lawsuit is the latest legal headache for Musk.
Musk, meanwhile, faces opposition from some Tesla shareholders, who will vote on June 13 on whether to approve his $56 billion compensation package. A Delaware judge invalidated the plan in January because she found Musk improperly controlled the process.
Tesla is incorporated in Delaware.
Musk is also conducting a regulatory investigation to determine whether he violated federal securities laws when he bought stock in social media platform Twitter (which he later renamed X) in 2022. Musk said the SEC was trying to “harass” him with baseless investigations.
Musk’s feud with the top U.S. markets regulator has been going on for years, dating back to 2018, when he tweeted that he had “secured funding” to take Tesla private.
Another shareholder lawsuit accuses Musk of defrauding X investors by delaying disclosure of his stake in the social media company to accumulate shares at a lower price.
© Thomson Reuters 2024
