this post was submitted on 05 Jun 2024
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  • Elon Musk accused of illegally selling $7.5 billion in Tesla stock in Q4 2022.
  • Lawsuit alleges Musk and board violated fiduciary duties by selling shares ahead of disappointing vehicle sales data.
  • Shareholder seeks disgorgement of $3 billion in illegal gains and damages from directors for reckless behavior.
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[–] [email protected] 32 points 5 months ago (2 children)

They have to give advanced notice before selling, they can't just sell stock on the whim.

[–] [email protected] 22 points 5 months ago

It was clearly more profitable to break the law than to follow it.

[–] [email protected] 16 points 5 months ago* (last edited 5 months ago) (3 children)

So?... I am the CEO... I know our new line of highly anticipated space tentacle dildos are not going to be in stores by Christmas as expected, I give notice and sell stock before the public finds out and stock goes down

I also know, because of the delay, we are squeezing the Chinese manufacturer, so I will give notice and buy the stock in January knowing we are probably going to offer deep discounts to get those consumers back

How is giving advance notice any safety? unless the rules say they need to give 500 days of notice or something long enough there is no possible way to predict properly with ALL the information and power a CEO would have to manipulate the stock

[–] [email protected] 19 points 4 months ago (1 children)

I don’t want to defend CEOs here, but there is a code for in the USA, Rule 10b5-1, which sets out a CEOs stock trading plan.

The reason, if you’re not Elon Musk, is that most CEOs are paid in stock and so it’s inevitable they’re going to sell some. So they set out a plan to say I will sell X shares on X date and the market shouldn’t be spooked.

What Elon did here is sell 45 million shares, seemingly outside of any plan, which is insane. Usually they wouldn’t be offloading such a volume.

Selling a small amount of your stock doesn’t indicate you don’t have faith in your own company, but more that you want to convert some of your reward (pay) into actual cash.

I’m not saying the system is good, just that this is how it works.

[–] [email protected] 8 points 4 months ago

I’m not saying the system is good, just that this is how it works.

Totally get it... which is why my comment was intended to mean "what the fuck kind of system is this"... not "Elon bad"... although, yes, Elon bad ;-)

[–] [email protected] 5 points 4 months ago (1 children)

If I'm a stock holder or potential buyer of stock and I read that the CEO is dumping billions of dollars of his own stock, I am going to think something bad is happening. Notifying the public in advance gives us more information to decide what we should do.

Sometimes, that information just tells us this is a scheduled dump of a small percentage, which is normal and expected. Sometimes it is a huge dump, which is unexpected.

[–] [email protected] 3 points 4 months ago (1 children)

If I’m a stock holder or potential buyer of stock and I read that the CEO is dumping billions of dollars of his own stock, I am going to think something bad is happening. Notifying the public in advance gives us more information to decide what we should do.

They don't have to notify the public at all

There is nothing in the SEC laws that makes it necessary to disclose the use of Rule 10b5-1 to the public, but that doesn't mean companies shouldn't release the information anyway. Announcements of utilizing Rule 10b5-1 are useful in warding off public relations problems and helping investors understand the logistics behind certain insider trades.

source

[–] [email protected] 1 points 4 months ago

You're correct. They do have to notify the SEC, but not necessarily release that publicly.

[–] [email protected] 2 points 4 months ago (1 children)

The public will see the notice and sell their stock before the CEO can, tanking the price

[–] [email protected] 1 points 4 months ago

The rules do not specify the public should be informed at all

There is nothing in the SEC laws that makes it necessary to disclose the use of Rule 10b5-1 to the public, but that doesn't mean companies shouldn't release the information anyway. Announcements of utilizing Rule 10b5-1 are useful in warding off public relations problems and helping investors understand the logistics behind certain insider trades.

Source