The court summoned Tesla's CEO Elon Musk on Monday. If he loses the case, he’ll have to pay more than $2 billion from his personal wealth.
He was summoned as the first witness in the case to defend himself in SolarCity’s acquisition worth $2.6 billion by Tesla. Shareholders dragged Musk and other members of the Tesla board in a lawsuit. The shareholders labeled the 2016 deal as an attempt to save a failed business.
Tesla, Inc is an electric vehicle and clean energy company. The company is located in Palo Alto, California, U.S. It was established in 2003 with the name Tesla Motors, Inc. Marc Tarpenning and Martin Eberhard were its founders. The company’s name Tesla is a tribute to Nikola Tesla, an inventor and electrical engineer. Currently, it provides its services in East Asia, New Zealand, Australia, Europe, and North America. It trades as TSLA on NASDAQ.
According to the shareholders, the deal profited the Musk family, who held the largest shares in the company.
Musk and others hid important information from the shareholders and didn’t fulfill their fiduciary responsibilities. Peter Rive and Lyndon, founders of SolarCity, are his cousins. Musk clarified that he had no role in the negotiations about the deal.
In 2020, all the board members Antonio Gracias, Kimbal Musk, Ira Ehrenprels, and Robyn Denholm, who were involved in the lawsuit, settled the matter with the shareholders by giving them $60 million. Musk, who holds the status of the second richest man in the world, became the sole defendant who took this fight to court. There was a delay in the trial due to Covid-19.
There is no jury for this case. The Delaware Chancery Court’s judge, Vice-Chancellor Joseph Slights III, will decide Musk’s fate.
The prosecutor claimed SolarCity wasn’t able to make profits for a long time, had huge debt, and was always struggling for cash. The company had a debt of $3 billion in 10 years. The company had to pay almost half of it till the end of 2017. 85% of Tesla's shareholders were in favor of buying SolarCity.
Musk’s attorney explained the 2016 deal was part of Tesla’s environmental mission to produce a wide range of products. This deal would allow the homeowners to install and finance solar rooftop panels from the same reliable company that provided them with home charging stations, backup batteries to store energy, and electric vehicles. Musk wanted to combine the electric vehicle startup and SolarCity to turn his vision of merging solar roof panels with Powerwall, which is Tesla’s home and industry battery storage product, into a reality.
Musk claimed in his testimony on Monday that Tesla had to shift its focus from the solar business to the Model 3 sedan as the company had to meet its production deadlines. He further explained the pandemic was responsible for the poor outcomes of Tesla’s solar division. Randall Baron, the attorney of the complainant, questioned Musk.
Most probably, the trial will go on for ten days. If the judge gives the ruling against Musk, he’ll have to pay far less than what he paid for the deal.