Musk Sued for Selling $7.5B of Tesla Stock Before Weak Sales Report

Elon Musk and the Tesla board are facing a shareholder lawsuit over his sale of $7.5 billion worth of Tesla shares in late 2022, ahead of a January 2023 sales report that sent the company’s stock price plunging, Chris Isidore reported for CNN.

The sales came not long after an Oct. 19, 2022 earnings call in which he told investors, “I can’t emphasize enough, we have excellent demand for Q4.” (Photo: Business Wire)

Musk sold a total of 41.5 million shares of Tesla stock between Nov. 4 and Dec. 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 an Oct. 19, 2022 earnings call in which he told investors, “I can’t emphasize enough, we have excellent demand for Q4.”

However, when Tesla reported fourth-quarter sales, the figures were far weaker than forecast, sending the stock down 12%—its worst trading day in more than two years.

“Musk profited from his misconduct and his exploitation of material and adverse inside information,” alleged the lawsuit, filed by shareholder Michael Perry.

The suit seeks to compel Musk to return profits from the stock sales to the company, as well as cover attorney fees and other costs incurred by Perry in bringing the case.

The complaint alleges that Musk likely knew the weaker sales report was coming at the time of the sales. Tesla cut prices in China by as much as 9% on Oct. 24, 2022, beginning a series of price reductions that have pressured electric vehicle prices industry-wide amid weaker-than-expected demand.