Elon Musk, the chief executive officer (CEO) of Tesla Motors is not new to controversy. He has faced investigations from federal agencies and has also been fined for his misleading tweets by the Securities and Exchange Commission (SEC) in 2018. Now, the SEC has opened a new investigation into alleged insider trading by him and his brother Kimbal Musk. The Wall Street Journal was the first to report the news, on Thursday.
Last year Kimbal Musk sold shares of Tesla one day before his brother Elon Musk conducted a Twitter poll where he had asked millions of his followers whether he should sell 10 percent of his shares in Tesla. He said that he would follow the result of the poll.
An overwhelming large number of followers said that he should sell his shares and this lead to a crash in the stock price of the electric car maker. As the poll resulted in a crash, the value of the company fell. However, his brother Kimbal had sold 88,500 shares just a day before the Twitter poll, when the stock was trading high.
Insider trading laws say that employees and board members cannot trade their company stocks using information that has not been put in the public domain. Kimbal Musk is a member of the Tesla board of directors. He sold a huge chunk of shares just before the poll. Hence, there could be conflict of interest.
The government has put in rules called 10b5-1 program. Using this program employees and directors can trade company stocks at times that have been predetermined for these stock sales. Kimbal Musk has used 10b5-1 in the past for selling stocks through 40 disclosures from the past decade or so.
When Kimbal Musk sold his 88,500 shares, on November 5, just a day before the Twitter poll that lead to a crash in stock price, there had been no indication that he used the 10b5-1 option. So, the SEC could be looking to investigate whether Musk spoke to his brother about the poll. Regulators might also probe to find put whether Kimball had heard of the poll from other sources and decided to trade in his Tesla stocks.
When asked for comment the SEC spokesperson declined to comment. Tesla Motors Inc. does not have a media relations department since 2019.
Image Elon Musk- Facebook
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