Tesla investors urge judge to order Musk to pay $13 billion for SolarCity deal

REUTERS/Mike Blake/File photo

Shareholders of Tesla Inc (TSLA.O) asked a judge on Tuesday to rule that Elon Musk forced the company’s board of directors into a deal over SolarCity in 2016 and wanted the chief executive convicted, the electric vehicle maker paid $13 in one of the largest lawsuits in history. billion.

“This case has always been about whether the SolarCity acquisition was a bailout from financial trouble, a bailout orchestrated by Elon Musk,” Randy Baron, a lawyer for the shareholders, said at the Zoom hearing.

Closing arguments listed the key findings of a 10-day trial in July, when Musk spent two days on the stand defending the deal. The lawsuit from union pension funds and wealth managers alleges that Musk forced Tesla’s board of directors to close the deal in order to approve it in cash. -tied to SolarCity, in which Musk was the largest shareholder.

Musk countered that the deal was part of a decade-long master plan to create a vertically integrated company that would transform energy generation and consumption with SolarCity roof panels and Tesla cars and batteries.
Evan Chesler, one of Musk’s lawyers, told the hearing that the deal was not a bailout and that SolarCity is far from insolvent and that its finances are similar to those of many high-growth companies.

“They were building billions of dollars of long-term value,” Chesler said of SolarCity.

The all-stock deal was valued at $2.6 billion in 2016, but Tesla shares have since soared.

Shareholder attorney Lee Rudy urged Deputy Chancellor Joseph Slights of the Delaware Court of Chancery to order Musk to return the Tesla shares he received, which would be worth around $13 billion at current prices.

Musk said in court papers that such an award would be at least five times the largest award in a comparable shareholder lawsuit, calling it a “windfall” for the plaintiffs.

Rudy said Slights should consider Musk’s disregard for the deposition and trial process, in which he repeatedly confronted and insulted shareholders’ attorneys.

“It would be a windfall for Elon Musk if he could keep the stock he never should have gotten in the first place,” Rudy said.

Chesler called the request to order Musk to return shares of the deal “absurd” and said it ignored five years of unprecedented success at Tesla.

Shares of Tesla fell 1% to around $1,040 in afternoon trading.

Tesla acquired SolarCity as the electric vehicle maker neared the launch of its Model 3, a mass-market sedan that was central to its strategy. Shareholders allege the deal was an unnecessary distraction and saddled Tesla with SolarCity’s financial problems and debt.

Shareholders claim that despite owning just 22% of Tesla, Musk was a majority shareholder due to his ties to board members and his domineering style. If the plaintiffs can prove this, it increases the likelihood that the court will conclude that the deal was unfair to the shareholders.

Musk’s lawyers said the famed businessman had no authority to fire directors or control their salaries and pulled out of price negotiations on the SolarCity deal.

“Without Elon Musk, Tesla could not exist, let alone be worth a trillion dollars,” said Vanessa Lavely, Musk’s attorney. “That doesn’t make him a controller. This makes him a highly effective CEO.
Slights ended the hearing by saying that he expects to rule in about three months. He said last week that he intends to retire in the coming months. And a request from related shareholders challenging Musk’s record pay package was transferred from Slights to another judge.

Fountain: Reuters


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