The relationship between the Securities and Exchange Commission (SEC) and Elon Musk is not about to improve. the wall street journal revealed on February 24 that the US stock market watchdog is investigating possible Tesla insider trading by Elon and his brother, Kimbal.
Too ideal a timing to sell Tesla shares?
Since 2018 and the beginning of the dispute between the SEC and Elon Musk, Twitter is never far away. In early November 2021, Kimbal Musk sells 88,500 Tesla shares for $108 million and donates another 25,000 shares to charity.
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The day after the operation, on November 6, his boss brother asked via a Twitter poll if he should sell 10% of his shares in the company to pay a tax under discussion. He swears to respect the result, whatever it is. 3.5 million voters will decide 58% that Elon Musk should sell.
The publication of the survey will lead to a drop in Tesla’s share price of just over 15% in the days that follow. Kimbal Musk got hot, but for the SEC luck may have nothing to do with it: Elon Musk’s brother could have known about the tweet in advance.
Kimbal Musk, as a member of Tesla’s Board of Directors, is exposed to insider trading. He has, in advance, information that the public does not have. Like any member of the Board of Directors, he should not use it to achieve a nice boost in the stock market.
To avoid being confronted with this type of accusation, there is a procedure for establishing a program for the sale of securities several days before the actual sale. Once programmed, it cannot be modified. Kimbal Musk has used this procedure 40 times since 2011, but this was not the case on November 5. What sharpen the suspicions of the SEC, even if it has already happened that such operations, unplanned occur in the past.
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In the FinancialTimesElon Musk dismissed the suspicions of the SEC, saying that “ Kimbal had no idea I was going to do a Twitter poll “. The Tesla founder added “ The idea that I care whether my brother can sell stocks for a few million dollars less when my Twitter poll has dropped the sale of my own stocks by over a billion dollars is utter nonsense. “.
Elon Musk’s shares, 4 billion, did indeed go on sale in the weeks following the poll. According to documents filed with the SEC, this operation was, in fact, scheduled, according to the procedure mentioned earlier, as early as September 2021.
When fully completed, on December 28, it brought Elon Musk $16 billion. The fall in Tesla’s share price after the tweet did indeed cause significant damage, well beyond the sum recovered by the brother, to its owner.
The SEC investigation is unlikely to succeed, according to experts consulted by the wall street journal. It would be necessary, for that, to find a written record where Elon Musk warns his brother of his tweet.
The investigation may never result in a formal complaint, but it is sure to sour relations between Musk and the agency a little more. In a tweet on February 23, the latter said, “ I didn’t start the fight, but I’ll finish it “. A few days earlier Elon Musk had filed a harassment complaint against the SEC.
I didn’t start the fight, but I will finish it.
— Elon Musk (@elonmusk) February 23, 2022