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Tesla CEO Elon Musk was accused of insider trading in a lawsuit filed by Tesla shareholders in Delaware Chancery Court on Thursday.
Shareholder Michael Perry alleges in the filing that Musk sold more than $7.5 billion of his shares in the electric vehicle company in late 2022 before potentially disappointing production and delivery numbers were released.
Perry said Tesla’s stock price plummeted after the company’s fourth-quarter financial results were released on Jan. 2, 2023, and he alleged that Musk “unjustly benefited” from about $3 billion in insider profits.
“Mr. Musk abused his position at Tesla and breached his fiduciary duties to Tesla,” the lawsuit states, according to Reuters. Perry is asking the court to order Mr. Musk to return any profits he made from the deal.
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Elon Musk, CEO of SpaceX and Tesla and owner of X, formerly known as Twitter, gestures while attending the Viva Technology conference on innovation and startups at the Porte de Versailles exhibition center on June 16, 2023 in Paris, France. (Reuters/Gonzalo Fuentes/Reuters Photo)
Musk sold the shares on various dates in November and December 2022, according to the complaint.
Perry also accused Tesla’s directors of breaching their fiduciary duties by allowing Musk to sell the stock.
Musk and Tesla did not immediately respond to Fox Business’ request for comment.
According to the lawsuit, Musk, who had said demand for Tesla vehicles would be “great” in 2022, accessed real-time data in mid-November and learned that production and delivery figures were disappointing, then sold his stock before the information was made public.
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A model of the new energy vehicle series is displayed at a Tesla store in Shanghai, China on March 26, 2024. (Photo by Costfoto/NurPhoto via Getty Images)
After Tesla announced price cuts for its vehicles in January and released the data, analysts expressed concern that there wasn’t demand for the company’s cars, and Tesla’s shares fell.
“If Musk had waited until material adverse news was released to make these sales, the profits he realized on his sales would have been less than 55% of the amounts realized on the sales in November and December 2022,” the lawsuit states.
The lawsuit comes as Musk is calling on Tesla shareholders to vote to reinstate his $56 billion compensation package after a Delaware court rejected it in January.
The judge ruled that Tesla’s board had not adequately disclosed its personal relationship with Musk and that the company was on track to meet most of the plan’s benchmarks. The lack of disclosure to shareholders made the compensation plan excessive, and the judge struck it down.
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Elon Musk attends the 2024 Breakthrough Prize Ceremony at the Academy Museum of Motion Pictures on April 13, 2024 in Los Angeles, California. (Photo: Taylor Hill/Getty Images/Getty Images)
Musk responded to the ruling by withdrawing from Tesla’s state of incorporation. Delaware to TexasThis is another item that will be presented to shareholders to vote at the general meeting.
Musk is also facing an investigation by the Securities and Exchange Commission (SEC) over his 2022 purchase of Twitter Inc., which he renamed X. Musk has said the SEC is trying to “embarrass” him with an unjustified investigation.
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A separate shareholder lawsuit accuses Musk of misleading investors in social media company X by delaying the company’s initial public offering and buying up shares at a lower price.
Reuters contributed to this report.
