Friday, December 3

Elon Musk Defends SolarCity Deal Against Shareholder Lawsuit | Tesla

Elon Musk took the stand Monday to defend Tesla’s 2016 acquisition of SolarCity against a lawsuit from shareholders seeking to recoup the $ 2.6 billion the company paid for the struggling solar panel maker.

Musk denied that the deal was a bailout, as Tesla shareholders have alleged.

“Since this was a stock-for-stock transaction and I had almost exactly the same percentage of [companies] there was no economic gain, ”he said, responding to his lawyer.

Musk’s testimony kicked off a two-week trial in Wilmington, Delaware, before Vice Chancellor Joseph Slights, who will decide whether the deal was fair to Tesla shareholders.

The lawsuit from union pension funds and asset managers alleges that the famous CEO lobbied Tesla’s board to buy SolarCity, just as it was about to run out of cash. Musk owned a 22% stake in the company, which was founded by his cousins. At the time of the purchase, he also owned a 22% stake in Tesla.

The shareholders asked the court to order one of the richest people in the world to reimburse Tesla for what he spent on the deal, which would be one of the largest judgments in history against an individual. The judge could award a much smaller amount of damages.

Wearing a dark suit, white shirt and dark tie, Musk testified that for years before the SolarCity deal he viewed the company as a natural part of the transition to sustainable energy.

At the time, it touted the deal as central to its “Master Plan, Part Deux,” which aims to reshape transportation by using sustainable energy to power autonomous electric vehicles.

Musk said he did not control the appointment of board members or compensation and that they negotiated the SolarCity deal and its terms without his influence.

When asked by his attorney, Evan Chesler, to describe his relationship with the board, Musk said: “I’d say good. They work hard and are competent. They offer good advice and are rigorous in acting on behalf of shareholders. “

In cross-examination, shareholder attorney Randall Baron advised Musk that “we plan to spend a lot of time with you. It’s going to be a routine ”.

Musk grimaced, rummaged through a 6-inch-thick display file, and replied, “I can tell from the folder.”

Legal experts said the judge will seek evidence that Musk threatened the board members or that the directors felt they could not stand up to him. The lawsuit accuses Musk of dominating deal discussions, pushing Tesla to pay more for SolarCity and misleading shareholders about its financial health.

Central to the case will be allegations that Musk, with his 22% stake in Tesla at the time, was nonetheless a majority shareholder. If it were, it would impose a stricter legal standard and increase the likelihood that the deal would be unfair to shareholders.

“It would be a surprise to most people if the court came out and said he doesn’t control here,” said Brian Quinn, a professor at Boston College Law School. “Because it certainly acts like it does.”

The directors of Tesla settled the allegations in the same lawsuit last year for $ 60 million, without admitting fault. Slights are likely to take months before I issue a ruling.

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