In a recent lawsuit filed in Delaware Chancery Court, a Tesla investor accused Elon Musk of exploiting insider information about his firm to sell $7.5 billion worth of Tesla stock in 2022.
In the case, shareholder Michael Perry alleged that Musk “improperly benefited” by around $3 billion in insider gains and that Tesla’s share price fell following the release of the company’s fourth-quarter financial results on January 2, 2023.
In addition, Perry charged that by permitting Musk to sell the stock, the Tesla directors had violated their fiduciary responsibility.
The lawsuit claimed that if Musk had made his trades after the quarter’s results were disclosed to shareholders, they “would have netted him less than 55% of the amounts realised.”
“Musk’s insider profits for his November and December sales were approximately $3 billion based on the January 3, 2023 closing price of $108.10 per share,” the lawsuit alleged.
Analysts expressed worry that the company’s cars weren’t in demand when Tesla revealed the data and said it would lower vehicle costs in January, and the company’s stock price fell as a result.
“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 realised from his November and December 2022 sales,” the complaint stated.
In light of the case, Musk has asked Tesla shareholders to cast votes in favour of restoring his $56 billion compensation plan, which was overturned in January by a Delaware judge.
The case represents Musk’s most recent legal entanglement.
It comes at a time when some Tesla shareholders oppose Musk and will vote on June 13 to approve or reject his $56 billion compensation plan, ruled invalid in January by a Delaware judge who discovered that Musk had inappropriately controlled the process.
We earlier reported that shortly after lowering pricing in the US, Tesla announced steep price reductions in China and Germany as it deals with diminishing sales and escalating competition in key countries.
