Tesla CEO Elon Musk is facing a lawsuit alleging he illegally sold $7.5 billion worth of Tesla stock in the fourth quarter of 2022, knowing it would disappoint investors after the company promised a “great end to the year.”
luck Reports In a lawsuit filed last week in Delaware court, shareholder Michael Perry accused Musk of deliberately selling off nearly 45 million shares to prevent the stock price from plummeting by an estimated 55% in the face of slumping auto sales. The suit also alleges that nearly the entire board of directors collectively breached its responsibilities to shareholders.
SHANGHAI, Jan. 7, 2020 — Tesla CEO Elon Musk poses with owners of a China-made Tesla Model 3 during a ceremony in eastern China’s Shanghai on Jan. 7, 2020. (Photo by Ding Ting/Xinhua via Getty)
“E. Musk abused his position at Tesla and breached his fiduciary duties to Tesla by disposing of Tesla shares valued at $7,530,113,926 in November and December 2022 while in possession of material adverse nonpublic information,” the complaint alleges, adding that other directors “knew and were responsible” for the same.
Unlike previous stock sales by Tesla insiders, these transactions were not the result of a Rule 10b5-1 trading plan, which takes timing discretion away from insiders and places it in the hands of third-party brokers. Tesla’s stock price fell to a two-year low on January 3, 2023 following the release of its auto sales data.
Perry is seeking Musk’s alleged illegal profits – an estimated $3 billion – to be returned to the company, as well as damages for “reckless disregard” from all eight of the company’s directors at the time.
The lawsuit alleges that Musk knew he needed to sell shares at the highest price possible to pay off the loan for his Twitter acquisition, but fourth-quarter sales were trending well below his bullish October 2022 forecast. Just days after boasting about “strong fourth-quarter demand,” Musk cut prices in China, the first of many to come.
According to former powertrain chief Drew Baglino, Tesla’s corporate culture is made up of “relentless measurers” who use up-to-the-minute data to drive sales and optimize every aspect of their business. As Musk himself said, “I don’t know if there’s a company on the planet that has better real-time data than Tesla. Our finger on the pulse is real-time, with no lag.”
The lawsuit alleges that Musk even personally studied the consequences of price changes to ensure production would continue to balance with demand.Using Musk’s own logic, the lawsuit argues that despite promising a “great end to the year” just weeks earlier, Musk knew the fourth quarter would not meet market expectations and would have sold his stock anyway to avoid losses.
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Lucas Nolan is a reporter for Breitbart News covering free speech and online censorship.
