Elon Musk Jabs at Opposing Counsel in Court Defense of Tesla’s SolarCity Purchase

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The Wall Street Journal 12 July, 2021 - 01:01pm 23 views

The case dates back to 2016, when Mr. Musk was chairman of both the then-unprofitable companies. His solution to improve their outlook: combine them in a roughly $2.1 billion tie-up to establish a single clean-energy business. Plaintiffs, which include several pension funds that owned Tesla stock, have characterized the deal as a scheme to benefit himself and bail out a home-solar company on the verge of insolvency.

Mr. Musk was the opening witness called in Delaware Chancery Court in a nonjury trial that is expected to run about two weeks. The attorneys for Mr. Musk have framed the acquisition as an opportunity to realize his long-held goal of creating a vertically integrated sustainable energy company.

A primary question in the case is whether Mr. Musk, who owned roughly 22% of Tesla at the time, controlled the transaction. Proving that claim is a challenge because Mr. Musk was a minority shareholder of Tesla and the company’s shareholders approved the acquisition. Lawyers for Mr. Musk have said that SolarCity was worth more than Tesla paid for it and the electric-vehicle maker’s board members, who included Mr. Musk’s brother, Kimbal Musk, acted independently.

Other issues before the judge include whether Tesla board members, some of whom also were SolarCity shareholders personally or through investment funds they managed, were conflicted and whether vital information about the deal was withheld from shareholders. Mr. Musk said Monday that an independent director handled the negotiation and that Tesla’s directors even overruled his proposal that Tesla provide temporary financing to SolarCity before the deal went through.

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Elon Musk under fire again: CEO to testify over Tesla's acquisition of SolarCity

MarketWatch 12 July, 2021 - 02:19pm

In the runup to Tesla Inc.’s 2016 acquisition of a company called SolarCity, Elon Musk hailed the deal as a “no brainer” — a purchase that would combine the leading maker of electric vehicles with a manufacturer of solar panels that can recharge EVs.

It didn’t exactly work out that way.

Questioned under oath, Musk plans to defend the purchase as a justifiable acquisition.

At the time of the all-stock purchase, Musk was SolarCity’s largest stakeholder and its chairman. Seven shareholder lawsuits, consolidated into one, alleged that Tesla directors breached their fiduciary duties in bowing to Musk’s wishes and agreeing to buy the struggling company. In what the plaintiffs call a clear conflict of interest, SolarCity had been founded by Musk and two of his cousins, Lyndon and Peter Rive.

Last August, a judge approved a $60 million settlement that resolved claims made against all the directors on Tesla’s board except Musk without any admission of fault. That left Musk, who refused to settle, as the sole remaining defendant. The trial that begins Monday had been scheduled for March of last year but was postponed because of the viral pandemic.

Daniel Ives, an analyst at Wedbush Securities, called the acquisition a “clear black eye” for Musk and Tesla, in large part because SolarCity has failed to turn a profit.

“It basically was putting good money after bad,” Ives said. “For all the successes and all of the unimaginable heights Musk has achieved, this is one of the lowlights.”

Most investors, Ives said, place no value on the company’s solar business.

“I just think Musk and Tesla underestimated the challenges and the hurdles that the business brings,” he said.

That said, Ives said he thought Tesla’s energy business could still become “modestly successful.”

Tesla, which has disbanded its media relations department, did not answer a message Friday seeking comment about the lawsuit. In its 2020 annual report, the company argued that the lawsuit was without merit and that Tesla would vigorously defend itself.

“We are unable to estimate the possible loss or range of loss, if any, associated with these claims,” the company report said.

Tesla’s energy generation and storage business generated $1.9 billion in revenue last year — 24% more than it did the previous year. Much of that revenue came from selling battery storage units. Tesla doesn’t specify whether the business made a profit, and it also has debt and expenses.

The lawsuit filed by the plaintiffs contends that Musk drove the decision to acquire SolarCity despite his clear-cut conflict of interest.

Musk has a history of fighting government agencies and lawsuits. He was forced to pay a $20 million fine to the Securities and Exchange Commission for making statements on Twitter about having the money to take the company private when he didn’t. But he won a defamation lawsuit that was filed by a British diver involved in the rescue of a Thai soccer team that was trapped in a flooded cave. Musk had called the man “pedo guy” on Twitter.

Even if the trial ends with Musk having to pay personally for the whole SolarCity deal, $2.5 billion won’t much hurt the world’s third-wealthiest person. Forbes magazine has estimated that Musk is worth roughly $163 billion.

Ives suggested that while any such payment wouldn’t seriously affect Musk’s wealth, it would damage his reputation for choosing acquisitions.

Musk is fighting the lawsuit after others have settled “because that’s what Musk does,” Ives said. “I think Elon believes this was the right deal and still does.”

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Musk tells court he dislikes being Tesla CEO as SolarCity trial opens

yahoo.com 12 July, 2021 - 02:19pm

WILMINGTON, Del. (Reuters) - Elon Musk insisted in court on Monday he does not control Tesla Inc and said he did not enjoy being the electric vehicle company’s chief executive as he took the stand to defend the company’s 2016 acquisition of SolarCity.

The lawsuit by union pension funds and asset managers alleges the celebrity CEO strong-armed Tesla's board into wasting the company’s assets to buy SolarCity, which was running out of cash. Musk at the time owned a 22% stake in both Tesla and SolarCity, which was founded by his cousins.

Musk said in his testimony Monday that he's tried "very hard not to be the CEO of Tesla, but I have to or frankly Tesla is going to die.”

The shareholders' lawsuit accuses Musk of dominating deal discussions, pushing Tesla to pay more for SolarCity and misleading shareholders about the deteriorating financial health of the solar panel maker.

Kicking off a two-week trial in Wilmington, Delaware, Musk, wearing a dark suit, white shirt and a slightly askew dark tie, refused to agree he controlled board members and disagreed that recordings of interviews depicted him as a boss with unlimited power.

Shareholder attorney Randall Baron asked if the board vetted his two “master plans” for Tesla or his Technoking title, which he gave himself in March.

“It generated a whole bunch of free press and Tesla doesn’t advertise and it’s helpful to general sales,” he said of the unusual title, calling it a joke. “I think I’m funny.”

Tesla's master plans outline the company's long-term goal to create affordable vehicles with sustainable power sources.

Central to the case are claims that Musk was a controlling shareholder of Tesla. If he was, it would impose a tougher legal standard and increase the likelihood the deal was unfair to shareholders.

Shareholders have asked the court to order Musk, one of world's richest people, to repay to Tesla what it spent on the deal.

Musk often declined to give the simple yes or no responses sought by Baron. Most of the questioning focused on the Tesla board’s control over Musk.

Musk was initially questioned for about an hour by his attorney, Evan Chesler, who asked him to describe his relationship with the board of directors. Musk said: “I’d say good. They work hard and are competent. They provide good advice and are rigorous in acting on behalf of shareholders.”

Legal experts said the judge will be looking for evidence that Musk threatened board members or that directors felt they could not stand up to him. Board members and others involved in the 2016 deal will testify beginning as soon as Tuesday.

Baron warned Musk at the start of questioning that "we plan to spend a lot of time with you. It's going to be a grind."

Musk grimaced, poked at the six-inch thick binder exhibit and replied "I can tell by the binder."

Tesla's directors settled allegations from the same lawsuit last year for $60 million, paid by insurance, without admitting fault.

(Reporting by Tom Hals in Wilmington, Delaware; Editing by Noeleen Walder, Daniel Wallis and Andrea Ricci)

Elon Musk insisted in court on Monday he does not control Tesla Inc and said he did not enjoy being the electric vehicle company’s chief executive as he took the stand to defend the company’s 2016 acquisition of SolarCity. The lawsuit by union pension funds and asset managers alleges the celebrity CEO strong-armed Tesla's board into wasting the company’s assets to buy SolarCity, which was running out of cash. Musk at the time owned a 22% stake in both Tesla and SolarCity, which was founded by his cousins.

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On Monday in the Delaware Court of Chancery, the Tesla CEO will testify about the $2.5 billion deal in a shareholder lawsuit that alleges that Tesla's acquisition was rife with conflicts of interest, overlooked SolarCity's fundamental weaknesses and unsurprisingly failed to produce the profits Musk had promised.

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UPDATE 5-Musk tells court he dislikes being Tesla CEO as SolarCity trial opens

Yahoo Finance 12 July, 2021 - 08:04am

By Tom Hals and Sierra Jackson

WILMINGTON, Del., July 12 (Reuters) - Elon Musk insisted in court on Monday he does not control Tesla Inc and said he did not enjoy being the electric vehicle company’s chief executive as he took the stand to defend the company’s 2016 acquisition of SolarCity.

The lawsuit by union pension funds and asset managers alleges the celebrity CEO strong-armed Tesla's board into wasting the company’s assets to buy SolarCity, which was running out of cash. Musk at the time owned a 22% stake in both Tesla and SolarCity, which was founded by his cousins.

Musk said in his testimony Monday that he's tried "very hard not to be the CEO of Tesla, but I have to or frankly Tesla is going to die.”

The shareholders' lawsuit accuses Musk of dominating deal discussions, pushing Tesla to pay more for SolarCity and misleading shareholders about the deteriorating financial health of the solar panel maker.

Kicking off a two-week trial in Wilmington, Delaware, Musk, wearing a dark suit, white shirt and a slightly askew dark tie, refused to agree he controlled board members and disagreed that recordings of interviews depicted him as a boss with unlimited power.

Shareholder attorney Randall Baron asked if the board vetted his two “master plans” for Tesla or his Technoking title, which he gave himself in March.

“It generated a whole bunch of free press and Tesla doesn’t advertise and it’s helpful to general sales,” he said of the unusual title, calling it a joke. “I think I’m funny.”

Tesla's master plans outline the company's long-term goal to create affordable vehicles with sustainable power sources.

Central to the case are claims that Musk was a controlling shareholder of Tesla. If he was, it would impose a tougher legal standard and increase the likelihood the deal was unfair to shareholders.

Shareholders have asked the court to order Musk, one of world's richest people, to repay to Tesla what it spent on the deal.

Musk often declined to give the simple yes or no responses sought by Baron. Most of the questioning focused on the Tesla board’s control over Musk.

Musk was initially questioned for about an hour by his attorney, Evan Chesler, who asked him to describe his relationship with the board of directors. Musk said: “I’d say good. They work hard and are competent. They provide good advice and are rigorous in acting on behalf of shareholders.”

Legal experts said the judge will be looking for evidence that Musk threatened board members or that directors felt they could not stand up to him. Board members and others involved in the 2016 deal will testify beginning as soon as Tuesday.

Baron warned Musk at the start of questioning that "we plan to spend a lot of time with you. It's going to be a grind."

Musk grimaced, poked at the six-inch thick binder exhibit and replied "I can tell by the binder."

Tesla's directors settled allegations from the same lawsuit last year for $60 million, paid by insurance, without admitting fault.

(Reporting by Tom Hals in Wilmington, Delaware; Editing by Noeleen Walder, Daniel Wallis and Andrea Ricci)

Elon Musk insisted in court on Monday he does not control Tesla Inc and said he did not enjoy being the electric vehicle company’s chief executive as he took the stand to defend the company’s 2016 acquisition of SolarCity. The lawsuit by union pension funds and asset managers alleges the celebrity CEO strong-armed Tesla's board into wasting the company’s assets to buy SolarCity, which was running out of cash. Musk at the time owned a 22% stake in both Tesla and SolarCity, which was founded by his cousins.

• Tesla CEO Elon Musk defended the electric car company’s 2016 acquisition of SolarCity against a lawsuit filed by shareholders, telling a Delaware court on Monday that he did not act improperly during the negotiation, The Wall Street Journal reported. Plaintiffs, including several pension funds that owned Tesla shares, say the deal was designed to benefit Musk and bail out a failing company.

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Tesla billionaire Elon Musk has taken to the witness stand to defend Tesla’s $2.6bn (£1.9bn) acquisition of a solar power company in which he was a major investor. Shareholders in Tesla have accused Mr Musk of pressuring board members to bail out SolarCity, which was founded by his cousins, and misleading them about its financial health. Mr Musk, one of the world’s richest people, has denied the deal was a rescue or that he was in complete control of Tesla’s decision-making at the time. Despite

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Musk to opposing lawyer: 'I think you are a bad human being'

Associated Press 12 July, 2021 - 02:00am

WILMINGTON, Del. (AP) — Tesla founder Elon Musk took to a witness stand Monday to defend his company’s 2016 acquisition of a troubled company called SolarCity against a lawsuit that claims he’s to blame for a deal that was rife with conflicts of interest and never delivered the profits he’d promised.

And to the surprise of no one, the famously colorful billionaire did so in the most personally combative terms.

“I think you are a bad human being,” Musk told Randall Baron, a lawyer for shareholders who was pressing Musk to acknowledge his mistakes in helping engineer the acquisition of SolarCity, a manufacturer of solar panels.

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

The long-running shareholder lawsuit asserts that Musk, who was SolarCity’s largest stakeholder and its chairman, and other Tesla directors breached their fiduciary duties in bowing to Musk’s wishes and agreeing to buy the company. In what the plaintiffs call a clear conflict of interest, SolarCity had been founded by Musk and two of his cousins, Lyndon and Peter Rive.

In the Delaware Court of Chancery on Monday, Baron sought to establish that Musk has sought to run Tesla without interference and therefore bears responsibility for any failures. The lawyer showed a video clip in which Musk said he liked running his own companies because he doesn’t want anyone to make him do what he doesn’t want to do.

As an example of what he characterized as Musk’s imperious management style, Baron mentioned that the CEO once declared himself “Technoking of Tesla” and gave his chief financial officer the title “master of coin’’ — a reference to HBO’s “Game of Thrones” — in a filing with the Securities and Exchange Commission.

The hostility between the billionaire CEO and the plaintiffs’ lawyer dates to at least 2019 and a deposition in which Musk insulted Baron and questioned his professionalism. On Monday, Baron played clips from that deposition to try to portray Musk’s stance toward what he might regard as criticism.

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

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

Musk, who is well-known for rejecting skepticism of himself or his company, insisted that he welcomes criticism:

“If I’m mistaken,” he said on the witness stand, “I view critical feedback as a gift.”

Musk said his off-beat titles and other quips simply reflect his sense of humor.

“I think I’m funny,” he offered.

What’s more, he said, the resulting media attention often plays to Tesla’s benefit.

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

Regarding Tesla’s all-stock acquisition of SolarCity, Musk asserted that he had nothing to gain financially from it because he owned shares of 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 resources toward salvaging production of the Tesla Model 3 electric car -- and then running “headlong into a pandemic.”

The effort to salvage Tesla 3 was “all-hands-on-deck” operation -- so desperate that even the company’s lawyers were enlisted in the effort, Musk said, drawing laughter in the court.

Musk’s defense noted that SolarCity had been in Tesla’s plans as early as his 2006 master plan for the electric carmaker. In saying so, he asserted that the joining of the companies 10 years later wasn’t an emergency bailout as the plaintiffs have alleged.

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

Seven shareholder lawsuits, consolidated into one, alleged that Tesla directors breached their fiduciary duties in bowing to Musk’s wishes and agreeing to buy the struggling company. Last August, a judge approved a $60 million settlement that resolved claims made against all the directors on Tesla’s board except Musk without any admission of fault. That left Musk, who refused to settle, as the sole remaining defendant. The trial that begins Monday had been scheduled for March of last year but was postponed because of the viral pandemic.

Daniel Ives, an analyst at Wedbush Securities, has called the acquisition a “clear black eye” for Musk and Tesla, in large part because SolarCity has failed to turn a profit.

“It basically was putting good money after bad,” Ives said. “For all the successes and all of the unimaginable heights Musk has achieved, this is one of the lowlights.”

Even if the trial ends with Musk having to pay personally for the whole SolarCity deal, $2.5 billion won’t much hurt the world’s third-wealthiest person. Forbes magazine has estimated that Musk is worth roughly $163 billion.

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