Elon Musk Appears in Court for Tesla’s Purchase of SolarCity

Elon Musk Appears in Court for Tesla’s Purchase of SolarCity

Tesla founder Elon Musk appeared on the witness stand on Monday to defend his company’s 2016 acquisition of a struggling company called SolarCity against a lawsuit that claims he is responsible for a deal riddled with conflicts of interest and which never generated the profits it had promised.
And to anyone’s surprise, the famous colorful billionaire did so on the most personally combative terms.

“I think you’re a bad human being,” Musk told Randall Baron, a shareholder lawyer who urged Musk to admit his mistakes in helping to design the acquisition of SolarCity, a solar panel maker.

“I have great respect for the court,” Musk later added, “but not for you, sir. “

The long-running shareholder lawsuit claims that Musk, who was SolarCity’s largest shareholder and its chairman, and other Tesla directors breached their fiduciary duties by complying with Musk’s wishes and agreeing to buy the society. In what the plaintiffs call an obvious conflict of interest, SolarCity was founded by Musk and two of his cousins, Lyndon and Peter Rive.

On Monday, in the Delaware Court of Chancellery in the United States, Baron set out to establish that Musk had sought to rule Tesla without interference and was therefore responsible for any failure. The lawyer showed a video clip in which Musk said he enjoys running his own businesses because he doesn’t want anyone to make him do what he doesn’t want to do.

As an example of what he called Musk’s compelling management style, Baron mentioned that the CEO once called himself “Technoking of Tesla” and gave his CFO the title of “master of Tesla”. coin ”- a reference to HBO’s“ Game of Thrones ”. ”- in a filing with the United States Securities and Exchange Commission.

The hostility between the billionaire CEO and the plaintiffs’ lawyer dates back to at least 2019 and from a deposition in which Musk insulted Baron and questioned his professionalism. On Monday, Baron aired excerpts from that deposition in an attempt to describe Musk’s stance on what he might consider critical.

Pushing back, Musk insisted Monday that “I don’t want to be the boss of anything.”

“I prefer to devote my time to design and engineering,” he said.

Musk, well known for dismissing skepticism about himself or his company, insisted he welcomed criticism:

“If I’m wrong,” he testified, “I take critical comments as a gift.

Musk said his offbeat titles and other jokes simply reflected his sense of humor.

“I think I’m funny,” he offered.

Plus, he said, the resulting media attention often works in Tesla’s favor.

“If we’re entertaining people will write stories about us and the company can save on advertising.

Regarding Tesla’s acquisition of SolarCity, Musk claimed he had nothing to gain financially because he owned shares in both companies.

Musk also argued that SolarCity’s failure to meet aggressive sales forecasts and its loss of market share were only temporary setbacks. He said they reflected his decision to divert Tesla’s resources to recouping production from the Tesla Model 3 electric car – and then launching ‘headlong into a pandemic’.

The effort to save Tesla 3 was an “everyone on deck” operation – so desperate that even the company’s lawyers were drafted into the effort, Musk said, causing the court to laugh.

Musk’s defense noted that SolarCity had been on Tesla’s plans as early as its 2006 master plan for the electric automaker. In saying this, he claimed that the companies joining 10 years later was not an emergency bailout, as the plaintiffs have alleged.

But Baron pointed out that the 2006 document only mentioned a potential business deal, not a full-fledged merger or acquisition, between Tesla and SolarCity.

Seven shareholder lawsuits, bundled into one, alleged Tesla directors breached their fiduciary duties by complying with Musk’s wishes and agreeing to buy the ailing company. Last August, a judge approved a $ 60 million settlement that resolved claims against all directors on Tesla’s board, except Musk, without any admission of fault. This left Musk, who refused to settle, as the only remaining defendant. The trial which begins on Monday was scheduled for March of last year but has been postponed due to the coronavirus pandemic.

Daniel Ives, analyst at Wedbush Securities, called the acquisition a “clear black eye” for Musk and Tesla, in large part because SolarCity did not make a profit.

“It was basically about putting the money after the bad,” Ives said. “For all the successes and unbelievable heights that Musk has reached, this is one of the weak spots. “

Even if the lawsuit ends with Musk having to personally pay for the entire SolarCity deal, $ 2.5 billion won’t do much harm to the third richest person in the world. Forbes magazine estimated that Musk is worth around $ 163 billion.


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