•

Musk accused of selling $7.5 billion of Tesla stock before releasing disappointing sales data that plunged the share price to two-year low

https://fortune.com/2024/06/03/elon-musk-tesla-insider-trading-lawsuit-board-directors/

The Tesla CEO faces claims he pocketed $3 billion in ill-gotten gains in late 2022 after learning Q4 vehicle sales would not deliver the 'epic end of year' he promised investors.

Musk accused of selling $7.5 billion of Tesla stock before releasing disappointing sales data that plunged the share price to two-year low

Elon Musk accused of illegally selling $7.5 billion in Tesla stock in Q4 2022.
Lawsuit alleges Musk and board violated fiduciary duties by selling shares ahead of disappointing vehicle sales data.
Shareholder seeks disgorgement of $3 billion in illegal gains and damages from directors for reckless behavior.

103 comments

ThePantser

•

Isn't that the definition of insider trading? Lock him up like Martha, she did way less and served time in a prison resort.

CraigeryTheKid

•

I need to look up how "insider trading" even works.

When you are the CEO, and you make decisions, and you own your own stock - wouldn't everything you ever do be with insider info? It is just honor system pinky-promise to act in good faith? I mean that sounds super effective.

teletext

•

Normally you publicly say looong in advance, like at least half a year in advance, that you plan to sell this amount of shares at this point in time. No more, no less, not earlier, not later, no backsies.

Warl0k3

•

Well no, there is backsies. You can rescind your intent to sell within a couple days. What most CEOs do is set up regular sells every month way in advance, then choose not to sell unless its opportune at the last minute. If that sounds like it completely defeats the purpose of the rule in the first place, yep! The system is rigged.

CleoTheWizard

•

Wouldn’t say completely. The notice of intent to sell is not there to prevent CEOs from selling when they want to, it’s to notify you that they could sell this much if they wanted to.

The purpose is just to say that you need to be prepared for a potential sale. If the CEO keeps backing out of a sale, that does hurt your ability to predict when they will but not how much they could sell and therefore how much those sales could potentially affect your investment.

All of that is strategic because otherwise investors could conceivably do the opposite and sell before the CEO is forced to sell and then buy his shares at a lower price. That would mean the stock would tank every time the CEO went to sell. The problem exists because most of the solutions are even worse

Warl0k3

•

That's a fair point, thank you! I was mostly commenting because that rule gets brought up every time someone talks about insider trading (and musk specifically) as a defense and it's deeply irritating. It makes sense the rule is more about not hobbling CEO investment than insider trading since it really doesn't do much to prevent the latter.

theneverfox

•

The problem exists because most of the solutions are even worse

Everything you said makes a lot of sense, but this drives it home... The stock market is so unbelievably ridiculous. It's just unmanageable, it's such a simple idea with such horrible effects it might be a great filter

Aurenkin

•

At my workplace we are only allowed to sell stocks within certain windows, usually it's a brief period immediately after we publicly release earnings. I think for higher ups it's even more restrictive.

NotMyOldRedditName

•

We had a 2 week window 2 or 3 days after earnings were released.

Edit: You could preschedule sales though like recurring once a month, but it wouldn't take effect immediately. I can't remember what the delay on that was, but it might have been starting after the next earnings?

EnderMB

•

I've known people at IC level sell outside of windows and barely get a mention. Some people have odd vesting schedules for things like RSU's, so sometimes it's unavoidable.

At higher levels, it's locked down considerably. My old director said that he had to have a meeting to go through a sale of his stock, so that it could be approved to be out of a window of potential releases in the company outside of his own division. I imagine that at VP+ level you need accountants just to handle what is a few clicks for an average corp worker.

DogPeePoo

•

Felon Musk

FlyingSquid

•

"Felonious Musk" might be a good nickname.

Johanno

•

That's only the 5th time he commits fraud. He has been at court several times because of his actions. It seems no one really wants to arrest him

jaybone

•

He should run for president. He can claim the long form version of his birth certificate says he was born in Hawaii.

exanime

•

Yes but you see, he is a billionaire... Insider trading and other laws are for the pauper rich

jaybone

•

I love how resort is tacked on there at the very end. Like you read it in a quiter voice.

lost_faith

•

Well, she did spend time in Club Fed

Spitzspot

•

Can we revoke his government contracts now?

ThePantser

•

Can we deport him now?

Ragnarok314159

•

Dude, you can’t talk about deporting people back to Africa. Not cool.

FrostyTrichs

•

Silentiea

•

If he's from Africa, why is he white?

/ref

Nusm

•

pennomi

•

No, that’s counterproductive because the government uses those services. Instead, the government could confiscate his stock in those companies.

TWeaK

•

SpaceX would probably be more profitable if they didn't have to spend so much time and resources on preventing Musk from interfering with things.

pennomi

•

It’s mostly Tesla and Twitter that he’s wrecking, but yeah Shotwell does sometimes rescue SpaceX from terrible ideas he has, like canceling Falcon Heavy.

TWeaK

•

Twitter was wrecked with the purchase, it's been on borrowed time since. The business is now worth less than the $13bn loan it took out to buy itself on Musk's behalf. It was a leveraged buyout, just like every business that goes under after "being saddled with debt".

theneverfox

•

I think you're really undervaluing his contributions. Think of it from an employee of space X's shoes

Having the big boss show up one day and yell "I want to launch my car out of orbit, start building a prototype right now, and everyone is doing overtime until it's done! I'll be sleeping in my office and walking around looking for excuses to fire people" is irreplaceable.

Do you think engineers build things just because that's what they do? Obviously you need to have someone rich yelling at them and threatening to fire people

afraid_of_zombies

•

Would be nice to have SpaceX be independent of him.

Fedizen

•

Martha Stewart this motherfucker.

cosmicrookie

•

So.. i vaguelly knew about her so did some searching

she served five months in federal prison for fraud and was released in March 2005. There was speculation that the incident would effectively end her media empire,[2] but in 2005 Stewart began a comeback campaign[3] and her company returned to profitability in 2006.[4] Stewart rejoined the board of directors of Martha Stewart Living Omnimedia in 2011[5] and became chairwoman of her namesake company again in 2012

Its pretty mild isn't it?

Fedizen

•

except they wont even do that to musk. Nobody wants to try a billionaire in court, musk is known to send armies of private detectives on people. He'll close a factory in your district out of spite. Billionaires are afraid of taxes because as long as they have way too much money they can continue to do the illegal shit that made them rich.

Texas_Hangover

•

And she got street cred, and hangs out with snoop dog now lol.

cosmicrookie

•

Oh wow! Was that her with the lighter commercial for Bic?

Didn't notice before now!

afraid_of_zombies

•

Love the idea of two of them only one has served time.

exanime

•

How could a CEO of any company trade his own stock from the company and not be insider trading?

The fact they are allowed to control stock is laughable... At best, stock from the company you control should be in a blind trust (which would still be laughable but we can at least pretend)

UnderpantsWeevil

•

The SEC has already proved itself absolutely toothless. Even if it was illegal, who would prosecute?

Michal

•

They have to give advanced notice before selling, they can't just sell stock on the whim.

Sabata11792

•

It was clearly more profitable to break the law than to follow it.

exanime

•

So?... I am the CEO... I know our new line of highly anticipated space tentacle dildos are not going to be in stores by Christmas as expected, I give notice and sell stock before the public finds out and stock goes down

I also know, because of the delay, we are squeezing the Chinese manufacturer, so I will give notice and buy the stock in January knowing we are probably going to offer deep discounts to get those consumers back

How is giving advance notice any safety? unless the rules say they need to give 500 days of notice or something long enough there is no possible way to predict properly with ALL the information and power a CEO would have to manipulate the stock

dependencyinjection

•

I don’t want to defend CEOs here, but there is a code for in the USA, Rule 10b5-1, which sets out a CEOs stock trading plan.

The reason, if you’re not Elon Musk, is that most CEOs are paid in stock and so it’s inevitable they’re going to sell some. So they set out a plan to say I will sell X shares on X date and the market shouldn’t be spooked.

What Elon did here is sell 45 million shares, seemingly outside of any plan, which is insane. Usually they wouldn’t be offloading such a volume.

Selling a small amount of your stock doesn’t indicate you don’t have faith in your own company, but more that you want to convert some of your reward (pay) into actual cash.

I’m not saying the system is good, just that this is how it works.

exanime

•

I’m not saying the system is good, just that this is how it works.

Totally get it... which is why my comment was intended to mean "what the fuck kind of system is this"... not "Elon bad"... although, yes, Elon bad ;-)

dogslayeggs

•

If I'm a stock holder or potential buyer of stock and I read that the CEO is dumping billions of dollars of his own stock, I am going to think something bad is happening. Notifying the public in advance gives us more information to decide what we should do.

Sometimes, that information just tells us this is a scheduled dump of a small percentage, which is normal and expected. Sometimes it is a huge dump, which is unexpected.

exanime

•

If I’m a stock holder or potential buyer of stock and I read that the CEO is dumping billions of dollars of his own stock, I am going to think something bad is happening. Notifying the public in advance gives us more information to decide what we should do.

They don't have to notify the public at all

There is nothing in the SEC laws that makes it necessary to disclose the use of Rule 10b5-1 to the public, but that doesn't mean companies shouldn't release the information anyway. Announcements of utilizing Rule 10b5-1 are useful in warding off public relations problems and helping investors understand the logistics behind certain insider trades.

source

dogslayeggs

•

You're correct. They do have to notify the SEC, but not necessarily release that publicly.

rbesfe

•

The public will see the notice and sell their stock before the CEO can, tanking the price

exanime

•

The rules do not specify the public should be informed at all

There is nothing in the SEC laws that makes it necessary to disclose the use of Rule 10b5-1 to the public, but that doesn't mean companies shouldn't release the information anyway. Announcements of utilizing Rule 10b5-1 are useful in warding off public relations problems and helping investors understand the logistics behind certain insider trades.

Source

cyborganism

•

This is bullshit. My EV ETF is not doing well and I'm losing my investment while this jagoff gets to sell his stocks ahead of the announcements and runs away with the money? Fuck that shit.

Shareholders should fucking sue if the government ain't gonna arrest him for insider trading.

KillingAndKindess

•

I wish I knew money enough to actually understand your comment, but here we are, both hating Elon and wanting him dealt with. Its beautiful really.

cyborganism

•

An ETF is an investment fund made up of stocks from different companies. A fund based on electric vehicle market could include Tesla, Chevrolet, Toyota, Ford, Kia and various other companies building EV parts like BASF or Northvolt for batteries or chargers.

The fund could be composed of, say, 30% Tesla, 10% Chevrolet, 10% Kia, 5% Ford, etc.

You can invest in the fund by purchasing parts, which then give you a return based on how many parts you bought and the performance of the stocks in the fund.

Does that make sense?

KillingAndKindess

•

It does. Thanks. Maybe one day i'll ve able to put it to use... 😅

cyborganism

•

You should check out Investopedia. They have a lot of information about this kind of stuff.

Silentiea

•

Also, ETF stands for "exchange-traded-fund". I like to know what the initial strand for

XTL

•

It is important. And in this case, it's even exactly what it says on the label. As long as you know what a fund and an exchange are.

r00ty

•

If you're using the ETF as a long term investment and you believe EVs are key to our future then you shouldn't worry about this too much (unless the ETF is made up of mostly TSLA in which case I'd not be too happy).

You've not lost money until you take it out of your investment.

cyborganism

•

True.

And Tesla is in the top 10 stocks with the highest percentage in the ETF. But doesn't hold as much importance as it used to it seems.

I just went and looked again and now the #1 is Nvidia. It used to be Tesla. I guess whoever is managing the fund was good enough to see what was going on and modified the investments.

tal

•

I believe that normally companies have restricted time windows for trading for people who may have access to information about the company.

kagis

https://corpgov.law.harvard.edu/2021/06/02/determinants-of-insider-trading-windows/

At most publicly traded firms, an insider trading policy (ITP) establishes a pre-specified open trading window each quarter when insiders are allowed to trade, which dictates a corresponding “blackout” period in which they are prohibited from doing so. The typical trading window begins 2-3 trading days after the previous quarter’s earnings release and ends approximately 2-3 weeks prior to the end of the next fiscal quarter, resulting in an allowed trading window of about six weeks. These restrictions on insider trading activity potentially provide both protection from legal or regulatory action as well as liquidity and cost of capital benefits (e.g., Fishman and Hagerty, 1992). Although there is substantial variation in the length and timing of these trading windows, little is known about the factors boards consider when determining these constraints. Furthermore, in addition to these pre-specified trading windows and corresponding blackout periods, firms may impose event-specific trading restrictions on insiders (e.g., due to ongoing merger or acquisition negotiations). These “ad hoc blackout windows,” which are undisclosed to the public, are largely unexplored in prior literature.

cyborganism

•

Normally, yes. Working in a couple of big corporations, we would be told when we can't trade because of internal announcements. We could potentially be accused of insider trading. Unless this read a timed trade that was already scheduled ahead of time.

cosmicrookie

•

That title is a very long way of saying that he's been accused of inside trade

IHeartBadCode

•

Forgot the final bullet points

US Government does jack shit in terms of legal ramifications for breaking law.
Musk pledges to break US law once again.

Skkorm

•

That's called Insider Trading, and is supposed to be illegal.

America

BigBananaDealer

•

its only illegal if youre dumb enough to not be paying judges and politicians. its not even a lot of money either like a couple thousand and theyll vouch for you

set_secret

•

What a joyous year if we could get Trump and Elon in jail this year.. They could be roomies!

UnderpantsWeevil

•

Neither of them are going to prison. Trump's judge explicitly said as much during his 10th contempt citation, and Musk has been pissing on the leg of the SEC for the last five years straight with no consequences.

set_secret

•

So you're saying they're never getting their comeuppance?

UnderpantsWeevil

•

Not under a Biden government, no

asexualchangeling

•

Please no, we don't need them plotting together in jail

mudstickmcgee

•

Would be a pretty funny "prison break esque" movie though.

The key to escape is Donald's tiny hands can reach things other prisoners hands are to big for.

Honytawk

•

And Elmo creates the perfect diversion by convincing every other prisoner to invest in prison coins, only to pump and dump em causing a riot.

some_guy

•

Lonnie wouldn't break investing rules. I trust him. He's a super genius and will save us all. Now let me go post racist bullshit on his everything app so people will think I'm cool.

He's a shithead. There will never be meaningful consequences. I hope he takes a rocket into space and never comes back.

masterofn001

•

I hope it does come back.

In a beautifully catastrophic arial display, of him and the others trying to escape, burning brilliantly on rentry.

"Nobody gets out alive - especially the billionaires" ~Jimbert Morrenstein

Semi_Hemi_Demigod

•

No, living on Mars will be terrible. I want him to get what he wants and be slowly poisoned while eating algae surrounded by people he hates in a small tin can buried in the ground.

LeFantome

•

To be fair, that is clearly his goal.

suction

•

Used to be you pull this shit (insider trading) and be locked away for life. Times they 'r a changing, indeed.

dual_sport_dork

•

I don't know about life. Martha Stewart got 5 months (and some house arrest and probation after that).

Gimpydude

•

Martha Stewart was convicted for lying and obstruction, not insider trading.

njm1314

•

When are Tesla shareholders going to wake up and understand that he's scamming them. You're all dupes and he's going to ride you to the last second and let you all burn.

Hotzilla

•

They are accepting his request to give him 50b$ worth of extra stock, at the same time as they are laying off people. What a joke.

Ballistic_86

•

Insider trading seems to have been perfectly legal for the last few decades. Nothing will come of this or it would start setting precedent that we could use against our government leaders and other billionaires and federal judges. Not gonna happen.

asteriskeverything

•

Punish him daddy

PsyDoctah9Jah

•

.... WHAT'S New in Capitalism......

🫠

HurlingDurling

•

So wait, is it OK to do INSIDER TRAIDING now?

afraid_of_zombies

•

Well not for me and you. I have worked for public traded companies before and they would announce blackout periods where we weren't able to sell. Since we worked inside the company and knew stuff the general public wouldn't.

Part of the many reasons why I won't do another 401k and instead use a Roth.

spidermanchild

•

What does a Roth vs 401k have to do with any of this? I buy index funds in both accounts, nothing to do with company stock programs whatsoever.

UnrepententProcrastinator

•

Well you have to account all the stress the poor people in power have to contend with each day. A little bonus at the end of the line is not that big of a deal. /s

frog_brawler

•

... and nothing will happen.

SonnyVabitch

•

Wouldn't that volume for sale appearing on the market decrease the price in and of itself?

ABCDE

•

Couldn't you have posted a non-paywalled article so we don't have to discuss a headline?

CEOs have to announce they will sell in advance. But, I can't see if he did this because of what you posted.

AnActOfCreation

•

Apologies, I run the Bypass Paywalls Clean extension for Firefox so I don't even notice when sites have paywalls (and I recommend everyone else do the same). It's right up there with adblockers as being almost an essential component of browsing the web these days.

https://github.com/bpc-clone/bypass-paywalls-firefox-clean

Here are a few more options for viewing the article without a paywall if you don't want to install an extension.

SaltySalamander

•

Is going to archive.is and copy/pasting the url too hard?

https://archive.is/gVXdT

ABCDE

•

I don't know, maybe ask the OP?

uebquauntbez

•

Oh NOOOOO! So you might point at this genius brain to tell us, he's just another fraudster? NOOOOoooooo! Who whould have thought? /s