Tesla investors urge judge to order Musk repay $13 bln for SolarCity deal

REUTERS / Mike Black / File photo

Shareholders of Tesla Inc. (TSLA.O) on Tuesday asked a judge if Elon Musk pressured the company’s board of directors for a deal for SolarCity in 2016 and wanted to convict the CEO that the electric vehicle maker had paid $ 13 in one of the largest judgments in history. Billion

“The case has always been about whether the acquisition of SolarCity was a bailout from financial difficulties, which was arranged by Alan Musk,” said Randy Barrow, attorneys for the shareholders, at the Zoom hearing.

The final arguments listed the main findings of the 10-day trial in July when Musk spent two days on the stand defending the deal. Lawsuits from union pension funds and wealth managers allege that Musk forced Tesla’s board of directors to reduce the deal in order to approve it for cash. -Strapped SolarCity, of which Musk was the largest shareholder.

Musk retorted that the deal was part of a decade-old master plan to create a vertically integrated company with Solarcity’s roof panels and Tesla’s cars and batteries to transform energy production and consumption.
Evan Chesler, one of Musk’s lawyers, said at the hearing that the deal was not a bailout and that Solarcity was far from bankrupt and that its finances were similar to those of high-growth companies.

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

The all-stock deal was worth $ 2.6 billion in 2016, but Tesla’s stock has risen since then.

Shareholder Attorney Lee Rudy requested Joseph Slits, vice chancellor of the Delaware Court of Chancery, to order Musk to return the Tesla stock he received, which would be about $ 13 billion at its current value.

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

Rudy said Slits should consider Musk’s contempt for testimony and the trial process, in which he repeatedly clashed with and insulted the shareholder attorney.

“It would be an unexpected event for Elon Musk if he got the share he never got first place,” Rudy said.

Chesler called Musk’s request to return the stock from the deal “irrational” and said he ignored five years of unprecedented success at Tesla.

Shares of Tesla were down 1% at about 0 1,040 in midday trading.

Tesla acquired SolarCity as the electric vehicle maker was approaching the launch of its Model 3, a mass-market sedan that was crucial to its strategy. Shareholders allege that the deal was an unnecessary disruption and that Tesla was burdened by Solarcity’s financial difficulties and debt.

Shareholders claim that although Tesla owned only 22%, Musk was a controlled shareholder due to his relationships with board members and his influential style. If the plaintiffs can prove this, it increases the likelihood that the court was unfair to the shareholders.

Musk’s lawyers said the celebrity entrepreneur had no right to fire the directors or control their salaries and withdrew from the price negotiations in the SolarCity deal.

“Without Elon Musk, Tesla could not exist, let alone a trillion dollars,” said Musk’s attorney Vanessa Levelly. “It doesn’t make him a controller. It makes him a very effective CEO.
Slits concluded the hearing by saying he expects to rule in about three months. He said last week that he wanted to retire in the next few months. And the request of the relevant shareholders competing for Musk’s record pay package was transferred from Slits to another judge.

Source: Reuters

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