Tesla CEO Elon Musk has landed in another controversy, as he has been named in a shareholder lawsuit for allegedly engaging in $7.5 billion worth of insider trading at the electric car company. The lawsuit, filed by Tesla investor Michael Perry in Delaware Chancery Court, accuses Musk of having inside knowledge about a potential miss in Tesla’s production and delivery targets when he sold more than $7.5 billion in stock in 2022.
Perry claims that Musk had nonpublic information indicating that Tesla would fail to meet its fourth-quarter targets in 2022 and sold his shares based on this insider knowledge. The lawsuit alleges that Musk “exploited his position at Tesla” and breached his fiduciary duties to the company and its shareholders. According to the suit, Musk sold the company shares to fund his acquisition of the social media platform X, formerly known as Twitter.
The lawsuit further asserts that “Musk profited from his misconduct and his exploitation of material and adverse inside information.” Perry has requested the judge to order Musk to return the profits from the alleged improper trading back to the company. Additionally, Perry has accused Tesla’s directors of failing to ensure that Musk complied with legal obligations related to stock sales and statements about Tesla’s financial performance.
Earlier in 2022, Elon Musk publicly praised Tesla’s quarterly performance, stating that the company enjoyed “excellent demand” and expected “to sell every car we make as far into the future as we can see.” However, the lawsuit contends that by November 2022, Musk was aware that Tesla would not meet its fourth-quarter targets. Before this information was officially disclosed, Musk sold shares worth $7.53 billion.
This lawsuit is the latest in a series of disputes involving Musk’s stock purchases, sales, and public remarks. It comes in the same week that the 52-year-old billionaire agreed to sit for a third round of questioning by the U.S. Securities and Exchange Commission (SEC) in its investigation into his acquisition of Twitter and whether he properly disclosed his initial stake in the company.
The outcome of this lawsuit could have significant implications for Elon Musk and Tesla, as it raises serious questions about the CEO’s compliance with securities laws and the fiduciary duties owed to shareholders.
