Elon Musk, CEO of Tesla Inc. TSLA, is embroiled in a lawsuit accusing him of leveraging insider information to profit from Tesla stock sales, according to a legal complaint initiated by the Employees’ Retirement System of Rhode Island (ERSRI).
The shareholder lawsuit, filed this Tuesday in Delaware Chancery Court, alleges Musk made billions from these transactions, Reuters reports.
According to court documents, between late 2021 and the end of 2022, Elon Musk and his brother, Kimbal Musk, a director at Tesla, sold approximately $30 billion worth of Tesla shares.
The lawsuit claims these sales occurred just before negative company news was expected to lower stock prices.
Further allegations suggest that Elon Musk inflated stock prices by not disclosing his intentions to use the sales proceeds to purchase the social media platform Twitter, which was subsequently rebranded to X.
The complaint also accuses Musk of selling shares, knowing Tesla’s vehicle deliveries were well below the public estimates.
Also Read: Tesla Argues New Pay Plan For Musk Would Cost More: Report
ERSRI, holding around 140,000 Tesla shares valued at approximately $24 million, expressed concerns over Musk’s actions potentially affecting shareholder value.
The timing of the lawsuit is critical. It coincides with a shareholder vote due in two days on whether to approve Musk’s $56 billion compensation package, which a Delaware judge recently nullified.
This lawsuit follows a similar claim made by another shareholder last month, who also accused Musk of insider trading.
Musk is concurrently undergoing a regulatory investigation to ascertain whether his purchases of Twitter stock in 2022 violated federal securities laws.
Amid these legal challenges, allegations have surfaced about Musk prioritizing external AI projects over Tesla’s interests, diverting resources to his other ventures like X and xAI.
Tesla stock has lost more than 31% in the last 12 months. Investors can gain exposure to the stock via ETFs, including Consumer Discretionary Select Sector SPDR Fund XLY and Fidelity MSCI Consumer Discretionary Index ETF FDIS.
Price Action: TSLA shares were trading lower by 0.12% at $170.45 premarket at the last check on Wednesday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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