Elon Musk’s brother Kimbal Musk applauds him during a press conference after launching the SpaceX Falcon 9 rocket and Crew Dragon spacecraft during NASA’s SpaceX Demo-2 mission to the International Space Station from the Space Center Kennedy in Cape Canaveral, Florida, USA on May 30, 2020.
Jonathan Ernst | Reuters
Coincidence or tip?
That’s the question behind report SEC insider trading investigation into Kimbal Musk sale Tesla shares before Elon Musk went public with his plans to sell shares of his own. According to The Wall Street Journal, the SEC opened an investigation after Kimbal Musk sold $108 million of his shares a day before Elon Musk polled Twitter users about selling 10% of his entire shares. Elon’s Twitter announcement and eventual stock sale sent Tesla shares plunging, and they ended up falling more than 30% from pre-announcement levels.
In addition to being Elon’s brother, Kimbal is also on Tesla’s board of directors. Internal trading rules prohibit company employees or board members from trading on 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 could be particularly difficult to prove.
First, Elon Musk’s personal plans for his own stock may not necessarily qualify as company information. Unlike a pending merger announcement or major product launch or recall, Musk’s plans to sell stock can be treated as his personal information rather than company documents.
Howard A. Fischer, a partner at Moses & Singer in New York, said: “Judgements around insider trading are no longer about market manipulation or unfairness, but about misuse of information belonging to the company. about employers”.
Musk told Financial Times in an email that Tesla’s attorneys were “aware” of his pending Twitter poll. But he said “Kimbal didn’t know I was going to do a poll on Twitter.”
The bigger hurdle to any allegations or allegations of insider trading would be communication evidence. If Kimbal Musk overhears Elon Musk talking about selling stocks or simply deduces that Elon will sell from another conversation, insider trading fees can be difficult to pursue.
The attorneys said the SEC will likely attempt to retrieve all communications between Kimbal and Elon Musk in the days or weeks leading up to the sale. That could include their personal and corporate email accounts, any other text messages or chat apps, as well as chat accounts and profiles of any communications. on the board of directors.
If they discuss the stock sale orally, without witnesses, it can be difficult to prove insider information. It will depend on what evidence they have, Fischer explains.
“It could be simply a coincidence that he was selling goods right before a transfer event. Or maybe they were at a family barbecue – if Muslims have a family barbecue – and Kimbal was just interviewing. guess that Elon is about to do something without a stock-specific conversation.”
Here’s the 2021 timeline for Kimbal sales and Elon’s Twitter sales and polls.
- September 14: Elon Musk plans 10b51 to sell Tesla stock. This was not disclosed publicly at the time.
- November 5: Kimbal Musk sells 88,500 Tesla shares — about 15% of his total holdings — at an average price of $1,229 per share. His total proceeds were $108.8 million.
- November 6: Elon Musk gives a poll to his followers: “Recently, most of the unrealized gains have been a means of tax avoidance, so I propose to sell 10% of the stock. My Tesla. Do you support this?” Musk promised to stick to the results, which resulted in 58% of votes in favor. Tesla’s stock price began to fall.
- November 10: Elon Musk sells more than 4 billion dollars in Tesla stock, kicked off nearly two months of stock sales. In his filing with the SEC, he revealed that the sale was part of a scheduled September sale.
- December 28: Elon Musk completes his stock sale, totaling $16 billion.
Tesla’s stock price is currently around $812 per share – about 34% lower than the price at which Kimbal Musk sold his shares.
