Musk begins testifying in defense of Tesla’s $ 2.6 billion SolarCity deal

WILMINGTON, Delaware, July 12 (Reuters) – Elon Musk spoke on Monday to defend the 2016 acquisition of SolarCity by Tesla Inc (TSLA.O) against a lawsuit filed by shareholders seeking to recover the $ 2.6 billion dollars that the company paid for the ailing solar panel manufacturer.

“Pretoria, South Africa,” Musk said, answering the first question about his birthplace.

Musk’s testimony kicks off a two-week trial in Wilmington, Delaware, before Vice-Chancellor Joseph Slights, which will decide whether the SolarCity deal was fair to Tesla shareholders.

The lawsuit by union pension funds and asset managers alleges the celebrity CEO heavily armed Tesla’s board to buy SolarCity, just when it was on the verge of running out of cash. Musk had a 22% stake in SolarCity, which was founded by his cousins.

Shareholders have asked the court to order Musk, one of the richest people in the world, to reimburse Tesla for what he spent on the transaction, which would be one of the most important judgments ever rendered against an individual. However, even if the judge finds the deal unfair, he could award much lower damages.

Musk argued that the deal was fair and that it was negotiated by Tesla’s board of directors without his influence and approved by fully informed shareholders.

He presented the deal at the time as being at the heart of his “Master Plan, Part Deux”, which aims to reshape transportation by using sustainable energy to power fleets of autonomous electric vehicles.

Legal experts said the judge would be looking for evidence Musk threatened board members or that directors felt they couldn’t stand up to him.

The shareholder lawsuit accuses Musk of dominating deal discussions, pushing Tesla to pay more for SolarCity and misleading shareholders about the solar panel maker’s deteriorating financial health.

At the heart of the matter will be allegations that Musk, who held a 22% stake in Tesla at the time of the transaction, was nonetheless a majority shareholder. If it was, it would impose a stricter legal standard and increase the likelihood that the deal would be unfair to shareholders. Read more

“It would be a surprise to most people if the court were to say that it is not in control here,” said Brian Quinn, professor at Boston College Law School. “Because he certainly acts the way he does.”

Musk is expected to be questioned by shareholder attorney Randy Baron, whom Musk called “objectionable” in a harrowing deposition in 2019 in which he also accused Baron of attacking sustainable energy, according to a transcript. .

When Baron asked if Musk had bailed out SolarCity, Musk replied, “You are a shameful person.”

Tesla administrators settled allegations from the same lawsuit last year for $ 60 million, paid for by insurance, without admitting fault.

Slights will likely take months before he makes a decision.

Reporting by Tom Hals in Wilmington, Delaware; Editing by Noeleen Walder, Daniel Wallis and Andrea Ricci

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