Elon Musk defends Solar City deal over shareholder lawsuit | Tesla

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Elon Musk took the stand Monday to defend Tesla’s 2016 acquisition of SolarCity against a lawsuit by shareholders seeking to recover the $2.6 billion the company paid to the struggling solar panel maker.

Musk denied that the deal was a bailout, as Tesla shareholders have claimed.

“Since it was a share-for-share transaction, I owned roughly the same percentage of both [companies] There was no financial gain,” he said, in response to his attorney.

Musk’s testimony has begun a two-week trial in Wilmington, Delaware, before Vice Chancellor Joseph Slates, who will decide whether the deal is fair to Tesla shareholders.

The lawsuit, filed by union pension funds and asset managers, alleges that the board of the famed Tesla CEO would buy SolarCity, just as it was about to run out of cash. Musk owns 22% of the company founded by his cousins. At the time of purchase, he also owned about 22% of Tesla’s stake.

Shareholders have asked the court to order one of the world’s richest people to pay Tesla what it spent on the deal, which would be one of the largest rulings ever against an individual. A judge can award much lower damages.

Wearing a dark suit, white shirt and dark tie, Musk testified that for years before the SolarCity deal, he saw the company as a natural part of the transition to sustainable energy.

He described the deal at the time as central to his “master plan, Part Deux,” which aims to reshape transportation using sustainable energy to power self-driving electric vehicles.

Musk said he had no control over the appointment of board members or compensation, and that they negotiated the Solar City deal and its terms without his influence.

Asked by his attorney, Evan Chesler, to describe his relationship with the board, Musk said, “I’d say fine. They work hard and efficiently. They give good advice and they are tough on acting on behalf of shareholders.”

Upon questioning, shareholder attorney Randall Baron Musk warned that “we plan to spend a lot of time with you. It’s going to be a crushing process.”

Musk frowned, stabbed into a 6-inch file gallery, and replied, “I can tell by the cover.”

Legal experts said the judge would look for evidence that Musk threatened board members or that directors felt they couldn’t stand up to him. The lawsuit accuses Musk of dominating deal discussions, prompting Tesla to pay more for SolarCity and misleading shareholders about its financial health.

The central allegations in the case will be that Musk, with his 22% stake in Tesla at the time, was nonetheless a controlling shareholder. If it was, it would impose a stricter legal standard and increase the possibility that the deal would be unfair to shareholders.

“It would be a surprise to most people if the court came out and said he doesn’t control here,” said Brian Quinn, a professor at Boston College Law School. “Because he definitely behaves as he does.”

Tesla executives settled allegations from the same lawsuit last year for $60 million, without admitting wrongdoing. Simple procedures will likely take months before he makes a judgment.

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