June 6, 2023

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Elon Musk and his brother are reportedly facing an internal trade investigation

Elon Musk and his brother are reportedly facing an internal trade investigation

The The Wall Street JournalCiting unnamed people familiar with the investigation, he said the investor watchdog is studying Tesla stock sales by Kimbal Musk, a Tesla board member, before his brother, Elon, announced in Twitter that it will sell 10% From his private holdings of Tesla, a move that sent Tesla (TSLA) Involved sharply In the days that followed.

Tesla did not respond to a request for comment on the reports, and CNN Business did not independently confirm the investigation.

Financial Times mentioned That Musk denied any wrongdoing, telling the newspaper the investigation was “just further evidence that Stevie is grinding his very small axe again”.

The reference appears to be Stephen Buchholz, an SEC employee at the agency’s San Francisco office, who is involved in SEC enforcement cases involving Musk and Tesla.

Musk’s lawyers also filed a complaint on Monday, accusing it of having occurred Leaks by the Supreme Education Council From the investigation of Musk, without detailing what those leaks revealed. The magazine’s story that exposed the investigation was published Thursday.

The investigation reportedly focused on Kimbal Musk’s sale of 88,500 shares of Tesla in November, from which he received nearly $109 million.

The shares represented about 15% of his stake in Tesla at the time. Unlike his brother Elon who rarely sold stock, Kimball Musk did. Stocks are sold regularly In the company.
On Saturday, November 6 – the day after Kimbal Musk sold his shares – Elon Musk posted an ad Twitter poll He asks if he should sell 10% of his stock. Musk claimed in a tweet that the sale would respond to the criticism he paid Little or no federal income taxdespite being The richest person on the planet. However, the main selling point was not the Twitter poll but the fact that he had a To exercise stock options which was due to expire in August, a move that would create taxable income.
get musk No salary or cash bonus of Tesla and is offset by profitable stock options that become taxable only when he uses them to buy stock.
Followers on Twitter Vote strongly for from sale in a survey. Elon Musk began selling the stock on Monday, November 8th. Tesla’s Inventory fell 5% that day, because some viewed Musk’s decision to sell as disbelief, and because the massive selling put downward pressure on his price. Musk’s sales itself that day — 934,000 shares worth $1.1 billion — were about 3% of Tesla’s shares in circulation.

If Kimbal Musk waited and sold his shares after his brother did, he would have made $5.8 million less. Company insiders, such as executives and members of the board of directors, are not allowed to trade when they have material information that is not yet public which could affect the value of the stock.

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It is not clear whether Elon Musk’s decision to exercise options and sell shares, or his plans to conduct a Twitter poll, will constitute information about the company and be subject to insider trading rules.

Speaking to the Financial Times, Elon Musk said: “Kimball had no idea I was going to take a Twitter poll.” “The idea that I would care whether my brother would sell a few million dollars less shares when my Twitter poll caused my stake sale to be reduced by more than $1 billion is completely absurd,” he added.

Between November 8 and the end of the year, Musk exercised options to purchase 22.9 million shares and sell a total of 15.7 million shares for $16.4 billion. Most of these sales were used to pay withholding taxes on the exercise of the options. he is too Donated shares It is worth about $5.7 billion to an unspecified charity.
Musk has always been Wrestles and criticizes the SEC. Tesla, Musk and the agency reached an agreement in 2018 after Musk misled investors in a tweet saying that he “financing insurance“To take Tesla private, when in fact he had discussions and You do not have closed financing.
Musk at the end Drop plans to make the company private. Today, Tesla shares are worth nearly 10 times the price Musk was proposing to pay for privacy.
The 2018 agreement, known as Decree of approvalMusk was forced to step down as president of Tesla, although he retained the title of CEO. Both he and Tesla were forced to pay a fine of $20 million, and Musk was ordered to review his tweets about material information about the company before they were published. Commenting on the Financial Times, he said the company’s lawyers were aware that he would be conducting a Twitter poll about selling his shares.

Matt McFarland contributed to this report.