SEC Investigates Elon Musk and Brother Over Insider Trading Concerns
The Tesla CEO and his restaurateur sibling are suspected of having violated insider trading rules by conspiring to offload billions of dollars worth of stock, according to a source for The Washington Post. In November, Elon Musk asked his Twitter followers whether he should sell ten percent of his Tesla stock to reduce the amount of tax he’d owe on unrealized capital gains. Elon Musk promised to abide by the results of the poll regardless of the outcome. Just days after the poll results revealed that 58 percent had voted in favor of his proposal, Elon Musk began selling billions of dollars worth of stock.
Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock.
Do you support this?
— Elon Musk (@elonmusk) November 6, 2021
But the timing of Elon Musk’s Twitter stunt raised a red flag to the SEC: Kimbal Musk had sold $108 million in Tesla stock just a day before. As Elon Musk’s Twitter poll gained traction, Tesla’s shares took a nosedive, suggesting many who had seen the poll had viewed it as a not-so-subtle sign to sell their own stock.
Given the suspicious succession of these events, the SEC is interested in finding out whether Elon Musk told his brother about his upcoming tweet ahead of time. If Kimbal Musk knew about the poll before it ended up on Twitter, the siblings’ communication could be deemed a violation of insider trading rules that prohibit the purchase or sale of shares when the shareholder possesses undisclosed material information. Elon Musk claims his brother did not know about the Twitter poll before it was posted, but that Tesla’s legal team was made aware in advance.
Due to the fact that Elon Musk could argue only he (versus his company) knew about or controlled his intent to sell, it’s currently unclear which Musk brother would face consequences for his shifty trades. The SEC could also close the investigation without taking any enforcement action at all. Whether the SEC gets to that point, though, will depend on the results of the probe—a process Elon Musk is likely to pester as much as he can, if previous occurrences are anything to go off of.
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