November 30, 2022

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Elon, it can be hard to follow through on the insider trade realization of Kimball Musk

Elon, it can be hard to follow through on the insider trade realization of Kimball Musk

Kimbal Musk, Elon Musk’s brother, applauds at a media briefing after the launch of a SpaceX Falcon 9 rocket and Crew Dragon spacecraft on NASA’s SpaceX Demo-2 mission to the International Space Station from NASA’s Kennedy Space Center in Cape Canaveral, Florida, US on May 30 , 2020.

Jonathan Ernst | Reuters

Coincidence or confidential information?

This is the question behind mentioned Insider trading investigation by the Securities and Exchange Commission into the sale of Kimball Musk Tesla Before Elon Musk announced his plans to sell his stock to the public. according to The Wall Street Journal, the Securities and Exchange Commission launched its investigation after Kimbal Musk sold $108 million of his shares a day before Elon Musk polled Twitter users about selling his entire 10% stake. The Twitter announcement and the sale of Elon’s shares eventually sent Tesla shares tumbling, eventually dropping more than 30% from pre-announcement levels.

In addition to being Elon’s brother, Kimball is a member of Tesla’s board of directors. Insider trading rules prohibit company employees or board members from trading material non-public information.

Lawyers for Kimbal Musk and Elon Musk declined to comment.

However, lawyers who specialize in insider trading say the case against the Musk brothers may be difficult to prove.

First, Elon Musk’s personal stock plans may not necessarily qualify as company information. Unlike a pending merger announcement, major product launch, or recall, Musk’s plans to sell his stock can be considered his personal information rather than company materials.

“The rulings about insider trading are now not about market manipulation or being unfair, but about the misuse of information that belongs to the business owner,” said Howard A. Fisher, partner at Moses & Singer in New York.

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Musk said financial times In an email, Tesla’s lawyers were “aware” of his Twitter polling suspension. But, he said, “Kimball had no idea I was going to do a Twitter poll.”

The biggest hurdle to any insider trading charges or allegations will be evidence of contact. If Kimbal Musk happens to hear Elon Musk talk about selling stocks, or simply conclude that Elon was going to sell from another conversation, it can be hard to follow insider trading fees.

Lawyers say the SEC will likely try to restore all communications between Kimbal and Elon Musk in the days or weeks leading up to the sale. This can include personal email accounts and company accounts, any other text or chat applications, as well as chat accounts and logs of any Panel communications.

If they discuss the sale of shares orally, without witnesses, proving inside information can be difficult. It will depend on what evidence they have, Fisher said.

“It might just be a complete coincidence that he sold right before a market-moving event. Or maybe they were at a family barbecue — if Musk had family barbecues — and Kimball just speculated that Elon was about to do something without having a specific conversation about the stock. “.

Here’s the 2021 schedule for Kimbal’s sale and Elon’s Twitter sales poll.

  • September. 14: Elon Musk creates a 10b51 plan to sell Tesla stock. This was not publicly disclosed at the time.
  • Nov. 5: Kimbal Musk sold 88,500 shares of Tesla — about 15% of his total holdings — at an average price of $1,229 per share. His total revenue was $108.8 million.
  • Nov. 6: Elon Musk tweeted a poll of his followers: “A lot of unrealized gains have been made lately as a way to avoid taxes, so I’m suggesting I sell 10% of my Tesla stock. Do you support that?” Musk promises to stick to the results, which leads to a 58% vote in favour. Tesla’s stock price begins to fall.
  • Nov. 10: Elon Musk sells More than 4 billion dollars in Tesla shares, ushering in nearly two months of stock sales. In an SEC filing, he disclosed that the sales were part of a sales program scheduled for September.
  • Dec. 28: Elon Musk completes stock sales of $16 billion.
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Tesla’s stock is now around $812 a share — about 34% less than the price at which Kimbal Musk sold his shares.