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| REUTERS/Mike Blake/File Photo |
Tesla Inc (TSLA.O) shareholders on Tuesday asked a judge to find that Elon Musk forced the company’s board of directors into a deal for SolarCity in 2016 and wanted the CEO convicted, the electric vehicle maker one of the largest judgments in history paid $13 billion.
“This case was always about whether the acquisition of SolarCity was a bailout from financial troubles, a bailout orchestrated by Elon Musk,” said Randy Baron, a shareholders’ attorney, at the Zoom hearing.
The closing arguments listed the key findings of a 10-day trial in July when Musk spent two days at the stand defending the deal.Lawsuit from union pension funds and wealth managers alleges Musk forced Tesla’s board of directors to cut the deal to approve for cash -strapped SolarCity, in which Musk was the largest shareholder.
Musk has countered that the deal was part of a decade-old master plan to create a vertically integrated company that would transform energy generation and consumption with SolarCity’s roof panels and Tesla’s cars and batteries.
Evan Chesler, one of Musk’s attorneys, said at 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 since that time Tesla’s stock has soared.
Shareholder attorney Lee Rudy urged Vice Chancellor Joseph Slights of Delaware’s Court of Chancery to order Musk return the Tesla stock he received, which would be worth around $13 billion at its current price.
Musk said in court papers such an award would be at least five times the largest award ever in a comparable shareholder lawsuit and called it a “windfall” for plaintiffs.
Rudy said Slights should consider Musk’s contempt for the deposition and trial process, in which he repeatedly clashed with and insulted shareholder attorneys.
“It would be a windfall for Elon Musk if he got to keep shares he never should have gotten in the first place,” Rudy said.
Chesler called the request to order Musk to return the stock from the deal “preposterous” and said it ignored five years of unprecedented success at Tesla.
Tesla’s stock was down 1% at around $1,040in afternoon trade.
Tesla acquired SolarCity as the electric vehicle maker was approaching the launch of its Model 3, a mass-market sedan that was critical to its strategy. Shareholders allege the deal was a needless distraction and burdened Tesla with SolarCity’s financial woes and debt.
Shareholders claim that despite owning only 22% of Tesla, Musk was a controlling shareholder due to his ties to board members and domineering style. If plaintiffs can prove this, it increases the likelihood that the court will conclude the deal was unfair to shareholders.
Musk’s lawyers said the celebrity entrepreneur had no authority to fire directors or control their salaries and withdrew from price negotiations in the SolarCity deal.
“Without Elon Musk, Tesla couldn’t exist, let alone be worth $1 trillion,” 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 he expects to rule in about three months. He said last week that he intends to retire in the next few months. And a request for related shareholders contesting Musk’s record pay package was transferred from Slights to another judge.
Source: Reuters