Tesla investor Michael Perry has filed a lawsuit against Elon Musk, accusing him of insider trading. Perry alleges that Musk sold $7.5 billion worth of Tesla stock in 2022, knowing that the company would miss its fourth-quarter targets. According to the lawsuit, the stocks would have been worth 55% less if Musk had sold them after the Q4 results were released.
The lawsuit, filed in Delaware Chancery Court, claims that Musk had access to non-public information about Tesla’s fourth-quarter production and delivery numbers, which influenced his decision to sell the stock before the financial report was made public. Perry points to statements made by Musk in a 2023 earnings call, where he mentioned having real-time updates on vehicle orders and production. Perry argues that this data, coupled with a change in Tesla’s production and delivery logistics at the time, suggests Musk had access to confidential information.
Perry also accuses Musk of misleading shareholders about the fourth quarter during an October 2022 earnings call. Musk stated that Q4 was “looking extremely good” and that there was “excellent demand,” leading shareholders to have high expectations.
This is not the first time Musk has faced allegations of insider trading. In 2023, a group of investors filed a class-action lawsuit against him, claiming he manipulated the price of Dogecoin cryptocurrency. As for this latest lawsuit, securities regulation expert James Park notes that while such lawsuits are common, they are often dismissed early on. However, in cases like Larry Ellison’s, where the court refuses to dismiss the case, there is an incentive to settle.
The lawsuit comes at a time when Musk is already facing scrutiny. A chancellor at the Delaware Chancery Court recently struck down his $55 billion pay package, and Musk is now considering moving Tesla’s incorporation state from Delaware to Texas. Investment funds, shareholders, and a proxy advisory firm have also urged Tesla investors to vote against reinstating Musk’s deal. The investors will meet on June 13 to vote on the pay package and the proposal to move Tesla’s incorporation state.
In conclusion, the lawsuit filed by Michael Perry against Elon Musk alleges insider trading, claiming that Musk sold Tesla stock based on non-public information about the company’s fourth-quarter performance. This is not the first time Musk has faced such allegations, and the outcome of the lawsuit and subsequent vote by Tesla investors will determine the consequences for the billionaire CEO and the future of the company.
