Elon Musk, the CEO of Tesla (NASDAQ:TSLA), is facing legal troubles yet again. According to Reuters, one of the company’s institutional shareholders, the Employees’ Retirement System of Rhode Island, has filed a case against Musk. The lawsuit alleges that Musk illegally profited from selling TSLA stock using insider information. Importantly, the latest lawsuit marks the second legal action against Musk for insider trading in the past month.
The insider transaction involves $30 billion worth of Tesla stock that Musk and his brother Kimbal Musk sold between late 2021 and the end of 2022. The shareholder claims that Musk took advantage of non-public material information, expecting a decline in the TSLA stock price.
Musk’s Legal Woes
It should be mentioned that another shareholder, Michael Perry, filed a similar lawsuit against Musk last month. Perry accuses Musk of selling over $7.5 billion in shares in late 2022, before the disclosure of TSLA’s Q4 delivery numbers on January 2, 2023, which caused the stock price to drop.
Additionally, Musk is also under investigation by the Securities and Exchange Commission (SEC) regarding his 2022 Twitter acquisition. The SEC is scrutinizing whether his actions during the purchase of Twitter, now known as X, violated federal securities laws.
Shareholders Yet to Vote over Musk’s Pay
These legal issues come as Tesla shareholders are preparing to vote on Musk’s $46 billion compensation plan at the company’s upcoming annual meeting on June 13.
Some shareholders have raised concerns over this substantial pay amid TSLA’s declining profit margins, slowing vehicle sales volume, and decreasing market capitalization.
Is Tesla a Buy, Sell, or Hold?
Despite legal troubles and EV demand concerns, the company’s efforts to introduce affordable models and reduce costs keep analysts neutral on the stock.
It has a Hold consensus rating based on nine Buys, 14 Holds, and nine Sells. The analysts’ average price target on Tesla stock of $172.92 implies an upside potential of 1.3% at current levels. Year-to-date, TSLA stock has declined by more than 31%.
