A Tesla shareholder filed a lawsuit on Thursday accusing CEO Elon Musk of insider trading when he sold over $7.5 billion of shares of the electric car maker in late 2022, saying the billionaire entrepreneur sold the shares before potentially disappointing production and delivery numbers were made public.
Shareholder Michael Perry, in the lawsuit filed in Delaware
Chancery Court, said that Tesla's share price plummeted after the company's
fourth-quarter numbers were made public on Jan. 2, 2023, and claimed that Musk
"improperly benefited" by about $3 billion in insider profits.
"Musk exploited his position at Tesla, and he breached
his fiduciary duties to Tesla," the lawsuit said, asking the court to
direct Musk to return the profits made from the trades.
According to the lawsuit, Musk sold the shares on various
dates in November 2022 and December 2022.
The lawsuit also accused Tesla's directors of breaching
their fiduciary duty by allowing Musk to sell the shares.
Musk and Tesla did not immediately respond to a Reuters
request for comment.
In the lawsuit, Perry said Musk - who in 2022 said demand
for Tesla's vehicles was "excellent" - found out about the
lower-than-expected numbers mid-November, with his access to real-time data,
and sold his shares before the information was public.
Following news of vehicle price discounts that sparked
demand concerns and the release of the numbers in January, Tesla's stock
tanked.
"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 realized from his November and December 2022 sales,"
the lawsuit said.
The lawsuit is the latest legal headache for Musk.
It comes as Musk faces opposition from some Tesla
shareholders who are set to vote on June 13 on whether to ratify his $56
billion pay package, which a Delaware judge voided in January because she found
he improperly controlled the process.
Tesla is incorporated in Delaware.
Musk is also in the middle of a regulatory probe to
determine whether he broke federal securities laws in 2022 when he bought stock
in social media platform Twitter, which he later renamed X. Musk said the U.S.
Securities and Exchange Commission was trying to "harass" him through
unwarranted investigations.
Musk and the top U.S. markets regulator have been in a
years-long feud, dating back to 2018, when he tweeted that he had "funding
secured" to take Tesla private.
A separate shareholder lawsuit has accused Musk of
defrauding X investors by delaying disclosure of his stake in the social media
company to amass shares at lower prices. -Reuters