Shareholders sued Musk over Tesla's deal with SolarCity for a $13 billion return

According to foreign media reports, on January 18, Tesla shareholders urged the judge to determine that Elon Musk forced the company's board of directors to approve the transaction with SolarCity in 2016, and these shareholders also asked the judge to order Musk to return $13 billion to the company.

SolarCity Solar Roof (Image: Tesla)

Shareholder lawyer Randy Baron said at the beginning of his closing statement: "The core of this case is that Musk's instigation of the board's acquisition of SolarCity is not a well-planned financial distress relief. In 2016, Tesla's deal with SolarCity was completed in the form of stocks valued at about $2.6 billion, and Tesla's stock price has since soared. The union pension fund and asset manager said in the lawsuit that Musk forced Tesla's board of directors to approve the deal with SolarCity in a tough way, when the latter was in a tight funding situation, and Musk himself was the largest shareholder of SolarCity.

Musk countered that the deal is part of Tesla's 10-year plan to create a vertically integrated business that leverages SolarCity's solar roof, as well as Tesla's cars and batteries, to change the way energy is produced and consumed. One of Musk's lawyers, Evan Chesler, said at the hearing that the deal was not a bailout, that SolarCity was far from bankrupt, and that its finances were similar to many tech companies in a period of rapid growth.

Shareholders lawyer Lee Rudy urged Delaware Court Deputy Justice Joseph Slights to order Musk to return the Tesla shares he acquired, which are worth about $13 billion at current prices. In his filing with the court, Musk said that the amount was at least 5 times the maximum compensation for a shareholder lawsuit of its kind, adding that it would be a "windfall" for the plaintiffs. Musk attorney Chesler said the demand for Musk to return the stock was "ridiculous" and said the plaintiffs ignored Tesla's unprecedented achievements over the past 5 years.

Shareholder lawyer Rudy said the judge should consider Musk's performance in the evidence collection and approval process, in which musk has repeatedly clashed with shareholder lawyers and insulted them. "If Musk can keep these stocks that he shouldn't have gotten, it's a windfall for him," he said. ”

Tesla's acquisition of SolarCity came as the company prepared to launch the Model 3, a mass-market electric vehicle that is critical to Tesla's strategy. Shareholders believe that acquiring SolarCity at this time would lead to unnecessary distractions and transfer SolarCity's financial woes and debt to Tesla.

Shareholders claim that although Musk only holds a 22 percent stake in Tesla, he is effectively the controlling shareholder of the company because of his close relationship with board members, combined with his strong personality. If the plaintiffs can prove this, the court is likely to find that the deal was unfair to shareholders. Musk has been telling the court that the deal with SolarCity was largely handled by Tesla's board of directors, and he himself avoided price negotiations.