New York (CNN) � Elon Musk and the Tesla board are facing a shareholder suit over his sale of $7.5 billion worth of Tesla shares in late 2022, ahead of a January 2023 sales report that sent the price of the stock plunging.
Musk between November 4 and December 12, according to company filings, as he liquidated some of his holdings to free up cash for his recently completed purchase of Twitter.
The sales came not long after a October 19, 2022 earning call in which he told investors “I can’t emphasize enough, we have excellent demand for Q4.�
But when Tesla reported than forecast, and that sent stocks down 12%, the worst day of trading for the stock in more than two years.
“Musk profited from his misconduct and his exploitation of material and adverse inside information,� alleged the suit, filed by shareholder Michael Perry. The suit requests that Musk return the profits on the stock sale to the company, as well as attorney fees and other costs to Perry for bringing the suit.
Musk likely knew the weaker sales report was coming at the time of the sale, the suit charges. Tesla reduced its prices in China by as much as 9% on October 24, 2022, starting a that has driven down prices of electric vehicles by Tesla and other automakers in the face of weaker-than-forecast sales.
And in April of last year, Musk bragged about the up-to-the-minute sales data that Tesla has, compared to automakers that sell their vehicles to a network of independent dealerships rather than directly to customers.
“I’m not sure there’s any company on earth that has better real-time data than Tesla, except maybe SpaceX Starlink,� he told investors at that time, referring to one of his other companies.
Tesla stock sales funded Twitter purchase
Before Musk started his efforts to buy social media platform Twitter, now known as X, the billionaire executive rarely sold Tesla shares. Most of the time, he faced due to the exercise of stock options. And most of those sales were part of a prearranged schedule, so there could be little question as to whether they were based on insider information.
But from April through December in 2022, Musk sold $22.9 billion worth of Tesla stock in unscheduled sales to help fund his of Twitter that year.
His sales in November and December of 2022, along with the price cuts in China, helped to push down the price of Tesla shares even before the January sales report. His sale on November 4 2022 came at an average price of $208.58, according to filings with the Securities and Exchange Commission. His final sales of this group, on December 14, came at an average price that day of $158.37.
But the January fourth-quarter sales report, which came on a Sunday, sent at the close the previous Friday.
Tesla shares soon rebounded, though, and more than doubled during the course of 2023 to close at $248.48. But shares have struggled this year, losing 29% of their value year to date through Monday’s close.
The suit was filed in Delaware Chancery Court on Thursday and first reported by . Tesla, which does not have a public relations department, did not return a request for comment.
The lawsuit comes as Tesla is to return the stock options to Musk that he was in Delaware. Two influential advisory firms have urged shareholders to his controversial billion pay package and raised concerns about the CEO’s numerous side projects.
The-CNN-Wire
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