Investigating the Ilona and Kimbala Mask insider trade can be difficult

Ilona Musk’s brother Kimball Musk applauds him at a briefing after the launch of the SpaceX Falcon 9 rocket and the Crew Dragon spacecraft during NASA’s SpaceX Demo-2 mission to the International Space Station from NASA’s Kennedy Space Center at Cape Canaveral, Florida, May 30. , 2020.

Jonathan Ernst Reuters

Coincidence or promotion?

This is the question behind the SEC’s insider trading investigation into Kimball’s sale of Tesla shares before Elon Musk unveiled his own plans to sell the shares. According to the Wall Street Journal, the SEC launched an investigation after Kimball Musk sold $ 108 million of its shares the day before Elon Musk asked Twitter users about selling 10% of his entire stake. The Twitter ad and the final sale of Ilona shares led to a decline in Tesla shares, and they eventually fell more than 30% from pre-announcement levels.

In addition to being Ilona’s brother, Kimball is also a member of Tesla’s board of directors. Insider trading rules prohibit company employees or board members from trading significant non-public information.

Lawyers for Kimbala Maska and Ilona Maska declined to comment.

However, lawyers specializing in insider trading say the case against the Musk brothers may be particularly difficult to prove.

First, Ilona Mask’s personal plans regarding his own shares may not necessarily qualify as company information. Unlike the expected announcement of a merger or launch or recall of a large product, Mask’s plans to sell his shares can be considered his personal information rather than company material.

“The verdicts against insider trading are now not about market manipulation or injustice, but about the misuse of employer-owned information,” said Howard A. Fisher, a Moses & Singer partner in New York City.

Musk told the Financial Times in an email that Tesla’s lawyers “knew” about his expected Twitter poll. But he said “Kimball didn’t know I was going to do a Twitter poll.”

A bigger hurdle for any accusations of insider trading would be proof of connection. If Kimball Musk accidentally overheard Elon Musk talking about selling shares, or simply concluded that Elon was going to sell from another conversation, accusations of insider trading would be difficult to pursue.

Lawyers say the SEC is likely to try to regain all ties between Kimball and Elon Musk a few days or weeks before the sale. This may include their personal and corporate email accounts, any text messages or other chat programs, as well as conversation accounts and records of any messages in the college.

If they had discussed the sale of shares orally, without witnesses, it would have been difficult to prove insider information. It will depend on what evidence they have, Fisher explained.

“Maybe it’s a coincidence that he sold before the market event. Or maybe they were at a family barbecue – when the Muscovites had a family barbecue – and Kimball just suggested that Elon was going to do something without having a specific talk about the stock.” .

Here’s a schedule of Kimball’s sales and Ilona’s Twitter poll and sales in 2021.

  • September 14: Elon Musk creates a 10b51 plan to sell Tesla shares. At the time, it was not publicly disclosed.
  • November 5: Kimball Musk sells 88,500 shares of Tesla – about 15% of its total stock – at an average price of $ 1,229 per share. Its total revenue is $ 108.8 million.
  • November 6: Elon Musk publishes a survey of his followers: “Recently, a lot has been done on unrealized profits, which are a means of tax evasion, so I propose to sell 10% of my Tesla shares. Do you support that?” Musk promises to meet the results that 58% voted for. Tesla’s share price is starting to fall.
  • November 10: Elon Musk sells more than $ 4 billion in Tesla shares, starting nearly two months of stock sales. In an SEC statement, he revealed that the sales were part of a September program of planned sales.
  • December 28: Elon Musk completes the sale of shares totaling $ 16 billion.

Tesla’s share price is now about $ 812 per share – about 34% lower than the price at which Kimball Musk sold his shares.

Investigating the Ilona and Kimbala Mask insider trade can be difficult

Source link Investigating the Ilona and Kimbala Mask insider trade can be difficult

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