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Elon Musk faces allegations that he illegally sold $7.5 billion worth of equity in Tesla<\/a> in the fourth quarter of 2022, knowing that the business would disappoint after promising investors an \u201cepic end of year.\u201d<\/p>\n In a lawsuit filed with a Delaware court late last week, shareholder Michael\u00a0Perry accused both the CEO of deliberately unloading nearly 45 million shares in advance of poor vehicle sales data to prevent an estimated 55% hit in value, and almost the entire board of collectively violating their responsibility of directors towards shareholders.<\/p>\n \u201cBy disposing of $7,530,113,926 worth of Tesla stock in November and December 2022 while he was in possession of adverse, material non-public information, E. Musk exploited his position at Tesla, and he breached his fiduciary duties to Tesla,\u201d\u00a0the lawsuit claims<\/a>, adding other directors were both \u201cknowing and culpable\u201d as well.<\/p>\n Unlike previous stock sales by Tesla insiders, however, these were not the result of a Rule 10b5-1 trading plan, which removes discretion over timing from an insider and hands them to a third-party broker.<\/p>\n Tesla shares slumped to a two-year low on January 3rd, 2023, following the release of the car sales data.<\/p>\n He is asking for Musk\u2019s illegal gains\u2014which the plaintiff estimates at $3 billion\u2014to be returned to the company via disgorgement, and is seeking damages from all eight directors at the time for their \u201creckless disregard\u201d.<\/p>\n The insider trading claims are Musk\u2019s latest legal headache following the January ruling that voided his 2018 shareholder vote for a record compensation deal. Tesla is re-running the vote at the June 13th annual meeting.\u00a0<\/p>\n Core to Perry\u2019s argument is establishing motive through the assertions that Musk knew 1) he\u00a0still needed to liquidate stock<\/a>\u00a0at as high a price as possible to cover a loan for purchasing Twitter<\/a> and 2) fourth-quarter sales<\/a>\u00a0trended well behind his bullish October 2022 expectations (Fortune<\/em>\u00a0even predicted<\/a>\u00a0as much at the time).\u00a0<\/p>\n Just days after boasting about \u201cexcellent demand for Q4\u201d, he\u00a0slashed prices<\/a>\u00a0in China\u2014the\u00a0first of many<\/a>\u00a0yet to come.\u00a0<\/p>\n Musk may have been aware of softening sales because of what his former powertrain head Drew Baglino described last March as a corporate culture composed of \u201cruthless measurers,\u201d all harnessing up-to-the-minute data to boost sales and optimize every aspect of Tesla\u2019s business.<\/p>\n \u201cI\u2019m not sure there\u2019s any company on Earth that has better real-time data than Tesla,\u201d Musk\u00a0said<\/a>\u00a0during the Q1 investor call last year. \u201cOur finger on the pulse is real time and does not have latency.\u201d<\/p>\n Musk went so far as to say he personally examines the results of each price change to ensure production can continuously balance demand, rising when Tesla has too many orders and falling when it has too few.<\/p>\n \u201cWe see what happens immediately, and adjust course. We\u2019re thinking about it literally every day,\u201d he continued. \u201cSeven days a week I look at that email and so does the rest of the team.\u201d<\/p>\n Using his logic, the CEO will have known that Q4 would not meet market expectations and sold his shares anyway.<\/p>\n Perry\u2019s lawsuit argued that it was reasonable to infer he did so to avoid losing money, having promised nothing short of an \u201cepic end of year<\/a>\u201d only weeks earlier.<\/p>\n \u201cMusk sold this stock before the non-public information in his possession could be publicly disclosed and affect the company\u2019s stock price,\u201d the suit claims.<\/p>\n<\/div>\n\n\u2018Ruthless measurers\u2019 at Tesla knew Q4 would disappoint<\/h2>\n