Elon Musk, CEO of Tesla, is facing a new legal battle. Earlier this week, Tesla shareholder Michael Perry filed a lawsuit accusing the billionaire entrepreneur of insider trading. The lawsuit, filed in Delaware Chancery Court, alleges that Musk sold over $7.5 billion worth of Tesla shares in late 2022 while aware of potentially disappointing production and delivery figures that had not yet been made public.
Perry claims Musk “improperly benefited” from this insider knowledge, reaping approximately $3 billion in profits when Tesla’s share price plummeted after the company released its fourth-quarter numbers on January 2, 2023. The lawsuit points to Musk’s previous statements in 2022, where he asserted that demand for Tesla vehicles was “excellent,” contrasting with the company’s later revealed struggles to meet production targets.
The lawsuit alleges Musk, who has access to real-time Tesla data, knew about the lower-than-expected production numbers by mid-November and strategically sold his shares before this information became public. Following news of price discounts aimed at stimulating demand and the eventual release of the disappointing figures, Tesla’s stock value took a significant hit.
Perry argues that if Musk had waited to sell his shares until after the release of this material information, his profits would have been less than half of what he gained by selling in November and December 2022. The lawsuit seeks to compel Musk to return the profits generated from these allegedly illegal trades and accuses Tesla’s board of directors of failing to uphold their fiduciary duties by allowing the sales to proceed.
This lawsuit is the latest in a string of legal challenges for Musk. He is currently facing opposition from some Tesla shareholders regarding his $56 billion pay package, which is set for a vote on June 13. This follows a Delaware judge’s decision in January to void the package, citing Musk’s improper influence over the process. Neither Musk nor Tesla has issued a public response to the lawsuit at this time.
