Tesla CEO Elon Musk is asking a Delaware judge to dismiss a shareholder lawsuit that accuses him of using insider information to sell $7.5 billion in Tesla stock in 2022, ahead of disappointing delivery and production results.
The legal filing, submitted August 4, contends the case is now invalid because Tesla officially changed its state of incorporation from Delaware to Texas in 2024. Musk’s legal team argues that the lawsuit, filed by investor Michael Perry in May 2024, was brought to the wrong jurisdiction and fails to show any actual harm to the company. (via Bloomberg)
Perry alleges Musk used non-public information about Tesla’s expected failure to meet Q4 2022 targets to inform his stock sale, which he claims helped fund Musk’s $44 billion acquisition of the social media platform known as Twitter at the time of the purchase, which has now been renamed X.
While Musk initially tried to exit the deal, he ultimately followed through.
The investor’s complaint also accuses Tesla’s board of failing to exercise proper oversight, alleging they allowed Musk to act in his own interest at the expense of the company. Perry is requesting that Delaware Chancery Court Judge Kathaleen St. J. McCormick compel Musk to return the profits he earned from the stock sale.
Judge McCormick is no stranger to Musk’s legal affairs—she oversaw the Twitter acquisition dispute and more recently voided Musk’s $56 billion pay package, ruling the compensation plan was improperly approved and inadequately disclosed to shareholders. That ruling is currently under appeal.
While this legal battle over Musk’s Twitter purchase, which was funded by the sale of Tesla shares, Tesla awarded him another 96 million restricted shares worth roughly $29 billion earlier this week. The award, meant to retain Musk’s focus amid his leadership roles at multiple companies, comes as litigation over the earlier compensation plan continues.
The case, Perry v. Musk, is being heard in Delaware Chancery Court under docket number 2024-0560.
