A Tesla investor has accused Elon Musk of using inside information about his company to sell $7.5 billion worth of Tesla stock in 2022, according to a lawsuit filed Thursday in Delaware Chancery Court.
The investor, Michael Perry, alleged in his complaint that Musk knew Tesla would not meet that year’s fourth-quarter expectations for vehicle deliveries and sold $7,530,113,926 worth of Tesla stock in November and December 2022 before the financial report is made public in January 2023.
The alleged lawsuit that Musk’s transactions “would have brought him less than 55% of the amounts realized” if they had been carried out after the publication of the quarter’s results to shareholders.
“Musk’s internal 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 claims.
Lawyers for Perry and Musk did not immediately respond to a request for comment.
Perry alleged in the lawsuit that Musk must have had access to information about his company that was not yet publicly available, which led to his stock sales.
The lawsuit cited statements Musk later made during a 2023 earnings conference call, during which the Tesla CEO said the company had a “real-time daily update on the number of cars ordered yesterday, number of cars produced yesterday” and that the data “has no latency” or delays.
Additionally, the lawsuit alleged that “a change in Tesla’s production and delivery logistics” at the time should have made Musk’s access to material non-public information about production and delivery numbers more likely. of Tesla in the fourth quarter.
Perry also accused Musk of misleading shareholders about what to expect in the fourth quarter of this year in October 2022. call for results.
“So the fourth quarter is looking extremely good,” Musk said on the call, according to a transcript published by The Motley Fool.
“I can’t stress this enough,” Musk also said, “We have excellent demand for the fourth quarter and we plan to sell every car we make as far into the future as we can see.”
Musk’s Larry Ellison moment?
Shareholders can bring a derivative lawsuit against a company’s directors if they believe a breach of their duties has occurred.
A notable case happened 2001 when Oracle’s then-CEO Larry Ellison was accused of selling nearly $900 million worth of stock before his company revealed it would fail to meet profit expectations, the New reported York Times.
Ellison settled and agreed to donate $100 million to charity, according to the report.
James Park, a securities regulation expert at the University of California, Los Angeles, told Business Insider that such lawsuits are not uncommon but are often dismissed at an early stage.
“But in some cases, like Ellison’s, the courts refuse to dismiss the case and then there is an incentive to settle rather than risk a trial,” he said.
Musk has previously been accused of insider trading.
Last year, a group of investors filed a class-action lawsuit against the billionaire, accusing him of manipulating the price of Dogecoin, the Shiba Inu-emblazoned cryptocurrency.
The lawsuit, filed in June 2023, is still ongoing.
Musk is also fighting to keep a $55 billion pay package after Delaware Chancery Court Chancellor Kathaleen McCormick canceled the deal in January. McCormick, described by a colleague as “unwavering” and with a history of siding with sellers in business acquisitions, will also review Perry’s lawsuit.
McCormick’s decision provoked Musk’s bitterness toward Delaware and proposed that Tesla be incorporated in Texas.
Since the pay package was canceled, investment funds, shareholders and a proxy advisory firm have also urged Tesla investors to vote against reinstating Musk’s deal.
Investors will meet on June 13 to vote on the package and a proposal to move Tesla’s state of incorporation from Delaware to Texas.
businessinsider
