The SEC is investigating whether Tesla stock trades made by Elon Musk and his brother violated insider-trading rules, WSJ report says
- The SEC is investigating whether Tesla stock trades made by Elon Musk and his brother violated insider trading rules, according to The Wall Street Journal.
- Kimbal Musk sold $108 million shares of Tesla stock one day before Elon polled his Twitter followers if he should sell 10% of his his stake.
- Tesla stock immediately fell 12% after the Twitter poll, and Elon went on to sell $16 billion worth of shares.
Elon Musk's rivalry with the Securities and Exchange Commission is only likely to grow after a report from The Wall Street Journal revealed that the agency is investigating stock sales made by Musk and his brother.
The SEC is looking into whether Tesla stock sales made by Musk and his brother, Kimbal Musk, violated insider trading rules, according to the report, citing people familiar with the matter.
The investigation started last year after Kimbal unloaded $108 million worth of Tesla stock just one day before Elon asked his Twitter followers if he should sell 10% of his Tesla stake to pay taxes, WSJ said.
The Twitter poll, which was posted on Saturday, November 6, received millions of votes overwhelmingly in favor of Musk selling part of his Tesla stake. Kimbal sold his Tesla shares on Friday, November 5. Tesla stock fell 12% on the following Monday, November 8, as investors digested an imminent share sale by Elon.
Kimbal saved about $18 million by selling 88,500 Tesla shares the day before Elon's Twitter poll, instead of selling near the lows on November 8. Elon would go on to sell more than $16 billion worth of Tesla stock, according to SEC filings.
The question at hand is whether Kimbal sold his Tesla stock after being told by Elon about the poll he planned to tweet or that he planned to sell shares. Kimbal is on the board of directors at Tesla.
The SEC's investigation into Kimbal and Elon could end without the agency making formal allegations of wrongdoing, according to the WSJ report. Tesla did not immediately respond to a request for comment from Insider.
Company insiders can prevent the appearance of trading on material non-public information by adopting a 10b5-1 trading plan, which sets predetermined intervals of share sales for the insider. Kimbal has taken advantage of this trading plan in previous sales of Tesla stock, but his November 5 sale did not include mention of a 10b5-1 plan, according to SEC filings.
Tesla has had a long running feud with the SEC ever since Elon was investigated for fraud related to his "funding secured" at $420 per share tweet in 2018. Part of Tesla's settlement with the SEC related to that investigation required that the company would review Elon's tweets. Tesla and Musk also agreed to pay $40 million in penalties, and Musk was required to step down from the company as its chairman.
In a court filing from earlier this month, Musk's lawyers argued that the funding secured tweet was entirely truthful because the company had backing from Saudi Arabia to go private. Earlier this week, Musk's lawyers accused the SEC of leaking information related to an investigation into Musk.