Elon Musk took the stand on Monday to defend Tesla’s 2016 acquisition of SolarCity against a lawsuit by shareholders seeking to recoup the $2.6 billion the company paid for the ailing solar panel maker.
Soon after taking the stand, Musk denied the deal was a bailout of SolarCity as Tesla shareholders have alleged.
“Since it was a stock-for-stock transaction and I owned almost exactly the same percentage of both there was no financial gain,” he said, responding to questions from his attorney.
Musk’s testimony kicks off a two-week trial in Wilmington, Delaware, before Vice Chancellor Joseph Slights, who will decide whether the SolarCity deal was fair to Tesla stockholders.
The lawsuit by union pension funds and asset managers alleges the celebrity CEO strong-armed Tesla’s board to buy SolarCity, just as it was about to run out of cash. Musk owned a 22 percent stake in SolarCity, which was founded by his cousins.
At the time of the purchase, he also owned about a 22 percent stake in Tesla.
Shareholders asked the court to order Musk, one of world’s richest people, to repay to Tesla what it spent on the deal, which would represent one of the largest judgments ever against an individual. However, even if the judge finds the deal was unfair, he could award a much lower amount of damages.
Musk, wearing a dark suit, white shirt and dark tie, testified that for years before the SolarCity deal he saw the solar panel company as a natural part of the transition to sustainable energy.
He touted the deal at the time as central to his “Master Plan, Part Deux,” which aims to reshape transportation by using sustainable energy to power fleets of self-driving electric vehicles.
Musk said on Monday that he did not control the appointment of board members or their compensation and that they negotiated the SolarCity deal and its economic terms without his influence.
Asked by his attorney, Evan Chesler, 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.”
On cross-examination, shareholder attorney, Randall Baron warned Musk 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.”
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.
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.
Central to the case will be allegations that Musk, with his 22 percent stake in Tesla at the time of the deal, was nonetheless a controlling shareholder. If he was, it would impose a tougher legal standard and increase the likelihood the deal was unfair to shareholders.
“It would be a surprise to most people if the court were to come out and say that he doesn’t control here,” said Brian Quinn, a professor at Boston College Law School. “Because he certainly acts like he does.”
Tesla’s directors settled allegations from the same lawsuit last year for $60 million, paid by insurance, without admitting fault.
Slights will likely take months before he issues a ruling.
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