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Allegations Against Musk: Improper Sale of $7.5 Billion in Tesla Stock Precedes Price Plummet After Sales Report


Legal Storm Brews: Musk Accused of Improper $7.5 Billion Tesla Stock Sell-off Preceding Sales Slump

A brewing legal battle is casting a shadow over Elon Musk and the Tesla board, as they face a shareholder lawsuit over Musk's sale of $7.5 billion worth of Tesla shares in late 2022. The contentious move occurred just ahead of a January 2023 sales report that sent Tesla's stock price plummeting. According to company filings, Musk offloaded a hefty 41.5 million shares of Tesla stock between November 4 and December 12, purportedly to liquidate holdings and amass cash for his recent acquisition of Twitter.

The timing raises eyebrows. Just weeks before the stock dump, Musk assured investors of robust demand during an October 19, 2022 earnings call, stating, "I can’t emphasize enough, we have excellent demand for Q4." However, when Tesla eventually disclosed its fourth-quarter sales, they fell dramatically short of expectations, triggering a 12% nosedive in stock prices—the worst trading day in over two years.

The lawsuit, spearheaded by shareholder Michael Perry, alleges Musk's misconduct and exploitation of material inside information for personal gain. Perry's legal action seeks restitution of Musk's stock sale profits to the company, alongside reimbursement of attorney fees and additional costs incurred.

The suit posits that Musk likely possessed foreknowledge of the impending dismal sales report at the time of the stock sale. Tesla's decision to slash prices in China by up to 9% on October 24, 2022, marked the onset of a price reduction spree among electric vehicle manufacturers, responding to weaker-than-anticipated sales.

Musk's boasts about Tesla's unparalleled access to real-time sales data further deepen the controversy. He once touted, "I’m not sure there’s any company on earth that has better real-time data than Tesla, except maybe SpaceX Starlink," underscoring Tesla's purported market insight compared to traditional automakers.

Prior to his Twitter acquisition endeavor, Musk seldom divested Tesla shares, mostly doing so to cover tax liabilities arising from stock options. These transactions were typically part of a predetermined schedule, minimizing suspicions of insider trading. However, from April through December 2022, Musk's unscheduled Tesla stock sales amounted to a staggering $22.9 billion—a move ostensibly aimed at financing his $44 billion Twitter acquisition.

As legal clouds gather, Musk finds himself ensnared in a legal quagmire, grappling with accusations of exploiting privileged information to orchestrate a profitable stock exodus, casting a shadow over his once-untarnished image.

Tesla Stock Saga Unfolds: Musk's Sales Drive Prices Down Amidst Legal and Financial Turmoil

In the intricate tapestry of Tesla's stock history, Elon Musk's sales maneuvers in November and December 2022 played a pivotal role in the tumultuous journey of the company's shares. Coupled with price cuts in China, these actions exerted downward pressure on Tesla's stock even before the fateful January sales report.

According to Securities and Exchange Commission filings, Musk's November 4, 2022 sale saw shares exchanged at an average price of $208.58. By December 14, the final sales of this period transpired at an average price of $158.37. However, the unveiling of the January fourth-quarter sales report, unveiled on a Sunday, catalyzed a sharp decline in share prices—from $123.18 at Friday's close to $108.10—a significant blow to investor sentiment.

Despite this setback, Tesla's stock managed to stage a remarkable recovery, more than doubling over the course of 2023 to culminate at $248.48. However, the trajectory has not been without its challenges. In the current year, shares have grappled with a 29% loss in value, accentuating the company's volatility and susceptibility to market forces.

The legal arena adds another layer of complexity to Tesla's narrative. The lawsuit, lodged in Delaware Chancery Court and first surfaced by Bloomberg, underscores the mounting legal woes facing Musk and the Tesla board. Notably, Tesla's absence of a public relations department leaves questions unanswered, as the company did not respond to requests for comment on the matter.

Meanwhile, Tesla finds itself navigating shareholder terrain fraught with dissent. Amidst efforts to secure shareholder approval for the reinstatement of Musk's stripped stock options—a consequence of a January court ruling in Delaware—controversy swirls around Musk's billion-dollar pay package and concerns raised by influential advisory firms regarding the CEO's myriad side projects.

As Tesla charts its course through choppy waters, the confluence of legal battles, financial challenges, and shareholder dissent shapes a narrative of uncertainty, challenging the company's resilience and the resolve of its leadership.

In conclusion, Tesla's trajectory remains a testament to the volatility inherent in the intersection of innovation, market dynamics, and corporate governance. Elon Musk's strategic maneuvers and the ensuing legal battles have cast a shadow over the company's journey, punctuated by peaks of success and troughs of controversy. As Tesla grapples with the aftermath of Musk's sales, shareholder dissent, and the quest for stability amidst market fluctuations, the road ahead is fraught with challenges. Yet, amidst uncertainty, Tesla's resilience and capacity for innovation stand as beacons of hope, illuminating a path forward amidst the turbulent seas of the automotive and technology industries.