Olga Prentiss
Jun 03, 2024 - 11:10

Elon Musk Accused of Selling $7.5 Billion of Tesla Stock Before Releasing Disappointing Sales Data That Plummeted Share Price to Two-Year Low

Elon Musk accused of illegally selling $7.5 billion in Tesla stock before disappointing sales data, facing insider trading claims.

Elon Musk is currently facing serious allegations regarding the illegal sale of $7.5 billion worth of equity in Tesla during the fourth quarter of 2022. Shareholder Michael Perry has filed a lawsuit in Delaware, accusing Musk of intentionally unloading nearly 45 million shares before the release of disappointing vehicle sales data. The lawsuit also accuses the entire board of directors of collectively failing in their responsibilities towards shareholders.

The lawsuit claims that Musk, by selling the stock while in possession of adverse non-public information, breached his fiduciary duties to Tesla. Unlike previous stock sales by Tesla insiders, these sales were not part of a Rule 10b5-1 trading plan, which removes timing discretion from the insider.

Following the release of the sales data, Tesla shares hit a two-year low on January 3, 2023. Perry is seeking Musk's illegal gains to be returned to the company and is also seeking damages from all eight directors at the time for their reckless behavior.

This insider trading allegation adds to Musk's legal troubles, following a recent ruling that voided his 2018 shareholder vote for a compensation deal. Tesla is set to re-run the vote at the upcoming annual meeting on June 13.

Musk's knowledge of softening sales may have come from Tesla's intense focus on real-time data and optimization. Musk has previously mentioned the company's ability to adjust prices and production in real-time based on demand, showing a deep understanding of the business's operations.

The lawsuit argues that Musk likely sold his shares to avoid financial losses, despite promising investors an "epic end of year." By selling before the adverse information was made public, Musk may have acted to protect his own interests rather than those of the company and its shareholders.