Elon Musk accused of $7.5 billion insider trading in lawsuit from Tesla shareholder

Elon Musk is considering changing Tesla's state of incorporation from Delaware to Texas due to a combination of factors. One significant reason is the voiding of his $55 billion compensation package at Tesla by a Delaware judge. Additionally, Musk has expressed dissatisfaction with the state of Delaware, going so far as to say, "Never incorporate your company in the state of Delaware."

Another factor influencing this decision is the potential establishment of a business court network in Texas, which could challenge Delaware's preeminence in this area5. Moreover, Tesla's headquarters are currently located in Texas, making the state a logical choice for incorporation.

Musk announced his intentions after conducting a poll on X, in which 87.1% of the 1,102,554 respondents voted in favor of shifting Tesla's state of incorporation to Texas. Following this, Musk stated that Tesla will move immediately to hold a shareholder vote on the matter.

Tesla shareholder Michael Perry filed a lawsuit against CEO Elon Musk, accusing him of insider trading. The specific allegations are as follows:

1. Musk sold over $7.5 billion of Tesla shares in late 2022, before potentially disappointing production and delivery numbers were made public.
2. Musk had access to non-public information about Tesla's underwhelming fourth-quarter performance and used this information to sell his shares at a higher price before the news went public.
3. By selling the shares before the release of the disappointing news, Musk improperly benefited by about $3 billion in insider profits.
4. Musk exploited his position at Tesla and breached his fiduciary duties to the company.

Perry also accused Tesla's directors of breaching their fiduciary duty by allowing Musk to sell the shares. The lawsuit asks the court to instruct Musk to return the profits he made from the trades.