Tesla Inc (TSLA.O) shareholders asked a judge Tuesday to determine whether Elon Musk coerced its board into signing a 2016 SolarCity deal. They also requested that the chief executive be required to pay $13 billion to the electric vehicle company.
Randy Baron, an attorney representing shareholders, stated that the Zoom hearing was about whether SolarCity’s acquisition was a rescue plan from financial distress or a bailout orchestrated by Elon Musk.
The closing arguments outlined key findings from the July 10-day trial, during which Musk spent two days defending the deal.
Plaintiffs from union pension funds and asset management allege that Musk influenced the Tesla board to approve the deal for SolarCity’s cash-strapped SolarCity. Musk was also the largest shareholder.
Musk countered by stating that the deal was part of a decade-old master plan to create a vertically integrated firm that would transform energy production and consumption using SolarCity’s roof panels, and Tesla’s cars or batteries.
One of the Musk lawyers, Evan Chesler, said that the deal was not a bailout. SolarCity was far away insolvent, and its finances were similar to many high-growth tech businesses.
Chesler spoke of SolarCity, saying that they were creating billions of dollars in long-term value.
In 2016, the all-stock deal was worth $2.6 billion. However, Tesla stock has skyrocketed since then.
Lee Rudy, a shareholder attorney, asked Vice Chancellor Joseph Slights of Delaware’s Court of Chancery for Musk to return the Tesla stock he had received. At its current price of $13 billion, it would have been worth approximately $13 billion.
Musk stated in court papers that such an award would be at most five times the amount ever awarded in a similar shareholder lawsuit. He called it a “windfall for plaintiffs.”
Rudy suggested that Slights consider Musk’s contempt in the deposition and trial processes, where he frequently clashed and insulted shareholder lawyers.
Rudy stated that Elon Musk would have a huge financial gain if he could keep shares he didn’t deserve.
Chesler called Musk’s request to return stock from the deal “preposterous”, and stated that it ignored five years worth of unparalleled success at Tesla.
Tesla stock fell 1% to $1,040 in afternoon trade
SolarCity was acquired by Tesla as the electric vehicle manufacturer was nearing the launch of the Model 3 sedan, which was crucial to its strategy. The deal, according to shareholders, was an unnecessary distraction that burdened Tesla’s financial problems and debt.
Shareholders claim that Musk, despite only owning 22% of Tesla’s stock, was a controlling shareholder because of his connections to board members and domineering manner. This will increase the chances that the court will find the deal unfair to shareholders if it is proven by the plaintiffs.
Musk’s lawyers claimed that Musk had no authority to fire directors or manage their salaries and that he resigned from the price negotiations for the SolarCity deal.
Vanessa Lavely, an attorney representing Musk, stated that Tesla without Elon Musk might not exist, let alone have a $1 Trillion value. He is not a controller, however. He is a highly efficient CEO.
Slights concluded the hearing by stating that he expected to rule within three months.
Last week, he stated that he plans to retire in the next few months. A related shareholder lawsuit challenging Musk’s record-setting pay package was transferred by Slights to a different judge.
