Musk defends timeline for Tesla’s $ 2.6 billion SolarCity deal

WILMINGTON, Del., July 13 (Reuters) – Elon Musk told a judge on Tuesday that Tesla Inc (TSLA.O) had to buy SolarCity in 2016 because the failing solar panel company was critical to the long-term goal of the manufacturer of electric vehicles to accelerate the transition to sustainable energy.

The famous CEO gave about eight hours of testimony over two days to defend himself against a lawsuit brought by union pension funds and asset managers who allege he pressured Tesla directors into buying SolarCity out of money. money for $ 2.6 billion.

Musk at the time owned a 22% stake in Tesla and SolarCity, which was founded by his cousins. Tesla shareholders want Musk ordered to return the value of the deal to Tesla.

Musk supplemented his testimony by answering several questions about when and why the agreement of Vice Chancellor Joseph Slights, the judge who will decide if Musk is responsible, is necessary.

Musk said Tesla was struggling in 2016 to develop its Powerwall battery system because it was difficult to integrate with other solar power systems.

“If we have a whole bunch of third-party solar systems, it’s a messy situation. We needed solar power within Tesla,” he told the judge.

Shareholders questioned the need to buy SolarCity and asked Musk if other solar companies were considered acquisition targets.

At the heart of the matter are claims that despite owning only 22% of Tesla, Musk was a majority shareholder due to his ties to board members and his domineering style. If plaintiffs can prove this, it increases the likelihood that the court will conclude that the transaction was unfair to shareholders.

Musk has always told the court that Tesla’s board primarily dealt with the SolarCity deal and recused itself from price negotiations.

Shareholder attorney Randall Baron on Tuesday asked Musk to explain meeting notes taken by a financial adviser showing Musk suggested the board offer a share price of $ 28.50 for SolarCity .

Tesla CEO Elon Musk leaves the Williams Justice Center after taking a stand to defend Tesla Inc’s 2016 deal for SolarCity in a case in the Delaware Court of Chancellery in Wilmington, Delaware, United States on 12 July 2021. REUTERS / Hannah Beier

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“I made it clear that any offer, if it is not publicly defensible, will be rejected by the shareholders of SolarCity,” said Musk.

In response to questions from his own lawyer Evan Chesler, who was trying to show that Musk did not dominate the board discussions, Musk noted that his suggestion was rejected at that meeting.

Baron asked Musk to explain why he reviewed the deal packages for Tesla’s board before they were sent to the directors, suggesting that the CEO was controlling the flow of information.

“It’s part of the board’s process to make sure they have complete and accurate information,” Musk said.

Musk has repeatedly defended the SolarCity deal, saying the company needs to be quickly acquired or find financing to resolve its dangerous cash shortage.

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.

Elon Musk’s brother, Kimbal, a director of Tesla who appears in court documents as a witness for both parties, was asked by the plaintiffs’ attorneys whether he believed his brother’s actions regarding the SolarCity’s deal were appropriate given that he had said he had recused himself.

Kimbal Musk replied that he did not understand how a CEO could be challenged from negotiating a deal.

“How could the CEO not be involved in one way or another,” he said. “It seems impossible.”

Kimbal Musk, other board members and others involved in the 2016 deal will testify during the trial, which began on Monday and is expected to last two weeks.

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

Reporting by Tom Hals in Wilmington, Delaware; Editing by Noeleen Walder, Andrea Ricci and Sonya Hepinstall

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