Tech

Elon Musk testifies to defend Tesla's $2.6 billion acquisition of SolarCity in shareholder lawsuit

Key Points
  • Tesla CEO Elon Musk testified in court Monday in a shareholder lawsuit over the company's $2.6 billion acquisition of SolarCity.
  • Musk said in his early testimony that he did not see a financial gain from the acquisition.
  • Musk is expected to continue his testimony throughout the day on Monday.

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Source: William Hennessy

WILMINGTON, Del. — Tesla CEO Elon Musk defended his role in the company's $2.6 billion acquisition of SolarCity in court Monday, arguing there was no controlling pressure on the deal.

Shareholders in the suit allege the 2016 deal amounted to a SolarCity bailout, suing Musk and his fellow board members. While the Tesla board members settled in late 2020 for $60 million, Musk opted to take the fight to court.

Musk's testimony, which began just after 9:20 a.m. ET, kicked off what is expected to be a two-week trial in Wilmington, Delaware, in front of Vice Chancellor Joseph Slights in the Delaware Chancery court. He spent about an hour being questioned by his own attorney before cross-examination began.

The plaintiff's attorney told Musk it would be a long day and questioning could spill into Tuesday.

If Musk loses, he could have to pay upwards of $2 billion. However, in this case, known as a shareholder derivative action, the suit is filed by investors on behalf of a corporation, rather than the individuals or funds. If the plaintiffs win, proceeds may go to Tesla and not to the stakeholders who brought the suit.

The big-picture question the trial will address is whether Musk acted in the best interests of Tesla's shareholders or whether he was making and urging decisions that would primarily benefit himself, his family and other companies he was involved in, SolarCity and SpaceX.

Musk, who showed up in a black suit, white button-down shirt and black tie, said in his testimony that the acquisition did not amount to a bailout. He also said he didn't put pressure on fellow board members.

"Since it was a stock-for-stock transaction and I owned almost exactly the same percentage of both there was no financial gain," Musk told his attorney on the stand. He said he didn't control the appointment of board members, their removal or their compensation.

Musk said that, frankly, he didn't even want to be in control of a company.

"I tried very hard not to be the CEO of Tesla," Musk said. "I don't like being the boss of anyone," he added, saying he doesn't believe he's viewed by the public as controlling of the company.

Musk said the SolarCity deal was part of his "master plan," which he had written in 2006 and was meant to accelerate the advent of sustainable energy.

'I have great respect for the court, but not for you, sir.'

Musk's sense of humor was also brought up in court, with Randy Baron, attorney for the shareholders, pointing toward Musk's self-appointment of himself as "Technoking of Tesla." The line of questioning was aimed at showing Musk's control to take action without board approval.

Musk pointed out Zach Kirkhorn, the company's chief financial officer, had also been given a new title, called "Master of Coin." "Let's not forget that," he said, seeming smug. (Musk argued it generated free press, which was good for the company as it led to more cars sold.)

The CEO also has a history of cantankerous interactions with attorneys and federal regulators. That was more apparent once Baron began cross-examining Musk. Baron started by showing clips of Musk's 2019 deposition, in which Musk repeatedly called the suit a waste of time and said Baron was a "shameful person."

Baron, discussing Musk's conduct, asked if he was "derisive" in his deposition for any reason and said the conduct was "not for some benefit of Tesla or some benefit to achieve something."

"I think you are a bad human being," Musk retorted. He said Baron was "mentored by criminals, then continued to be mentored by criminals."

"That is why I do not respect you," he said. "I have great respect for the court, but not for you, sir."

The two also sparred back-and-forth over the length of Musk's answers, with Baron calling them unnecessarily extended anecdotes that were holding up the day. Musk repeatedly avoided yes or no answers, saying they would be incomplete.

Following a one-hour lunch recess, Baron shifted his line of questioning to dig into Solar City's finances.

Musk repeatedly argued that Solar City would have been able to raise capital even if it hadn't been acquired by Tesla.

"I have absolute faith that Solar City would have been able to raise money independently," Musk said, keeping his cool after more than six hours in court.

Baron also argued that Musk "decided" he would prefer for Solar City to be acquired rather than spend time fundraising, without board approval.

The court adjourned for the day at 4:45 p.m. ET. Musk is expected to resume his testimony Tuesday morning.

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