Unlock Premium Data: Up to 50% Off InvestingProCLAIM SALE

Tesla shareholder sues Musk to return billions in alleged unlawful profits

Published 2024-06-11, 07:57 p/m
© Reuters. FILE PHOTO: Elon Musk, CEO of SpaceX and Tesla and owner of X, formerly known as Twitter, gestures as he attends the Viva Technology conference on innovation and startups at the Porte de Versailles exhibition centre in Paris, France, June 16, 2023. REUTER
TSLA
-

WILMINGTON, Delaware (Reuters) -Elon Musk made billions of dollars by selling Tesla (NASDAQ:TSLA) stock using insider information, an institutional shareholder accused in a lawsuit filed on Tuesday, asking the court to direct the Tesla CEO to return "unlawful profits."

The lawsuit comes two days before a critical vote by Tesla shareholders on whether to reinstate Musk's $56 billion pay package, after a Delaware judge voided it in January because she found that Musk had improperly controlled the process.

Musk and his brother, Kimbal Musk, a Tesla director, sold a combined $30 billion in the electric vehicle maker's stock between late 2021 and the end of 2022, cashing in before news that would cause the stock to fall became public, according to the lawsuit, which was filed by the Employees' Retirement System of Rhode Island (ERSRI).

Musk sold the shares at artificially inflated prices by concealing his plan to use the proceeds to buy social media platform Twitter, which he later renamed X, according to the lawsuit, filed at the Delaware Chancery Court. Musk also sold Tesla stock when he knew that deliveries of Tesla cars had fallen far below public projections, the lawsuit said.

Musk and Tesla did not respond to messages seeking a comment.

The Employees' Retirement System of Rhode Island holds about 140,000 shares of Tesla. Tesla's stock closed at $170.66 on Tuesday, valuing the stake at about $24 million.

A similar suit filed at the same court late last month by Michael Perry, another Tesla shareholder, accused Musk of insider trading when he sold over $7.5 billion of shares in Tesla in late 2022.

Musk is in the middle of a regulatory probe to determine whether he broke federal securities laws in 2022 when he bought Twitter stock.

Tuesday's lawsuit by ERSRI also said that Musk had been disloyal toward Tesla in several instances, including diverting Tesla employees to work at X and causing Tesla to start paying for advertising on Twitter after he bought the platform.

ERSRI was concerned that Tesla's board of directors was not doing enough to oversee Musk's conflicts of interest, the fund's general treasurer said in a statement.

© Reuters. FILE PHOTO: Elon Musk, CEO of SpaceX and Tesla and owner of X, formerly known as Twitter, gestures as he attends the Viva Technology conference on innovation and startups at the Porte de Versailles exhibition centre in Paris, France, June 16, 2023. REUTERS/Gonzalo Fuentes/File Photo

Musk also helped xAI, where he is CEO, to hire Tesla employees and divert artificial intelligence (AI) semiconductors bound for Tesla to the X messaging platform and to xAI, the lawsuit alleged.

News last week of the AI chip shipments raised worries that Musk was giving precedence to AI-related development outside Tesla. In a post on X, Musk said Tesla had no place to store and turn on the Nvidia (NASDAQ:NVDA) AI processors.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.