Musk solely defends Tesla's $2.6 billion SolarCity purchase in court

19:49, 12 July 2021
Musk solely defends Tesla's $2.6 billion SolarCity purchase in court Photo: Kim Shiflett/Global Look Press

Tesla CEO Elon Musk has solely defended the company's 2016 acquisition of SolarCity in court in Wilmington, Delaware, against a lawsuit seeking to recoup the $2.6 billion the company paid for the ailing solar panel maker.

He denied Tesla shareholders allegations that the deal was a bailout of SolarCity.

"Since it was a stock-for-stock transaction and I owned almost exactly the same percentage of both there was no financial gain," Musk said, taking the stand.

The solar panel maker, where the billionaire had a 22% stake, was founded by Musk's cousins, Lyndon Rive and Peter Rive. SolarCity had accumulated over $3 billion in debt in its 10-year history.

Tesla union pension funds and asset managers filed a suit in 2017, saying that the deal benefitted Tesla CEO itself and its minority of stockholders. They asked a court for an order to make Musk repay Tesla the whole $2,6 billion spent on the deal, which would be one of the largest judgments ever against an individual. At the time of the purchase, he also owned about a 22% stake in Tesla Inc.

In a courtroom, Musk testified that for years before the SolarCity deal he saw the company as a natural part of the transition to sustainable energy as part of a strategy he called the "Master Plan, Part Deux."

He said Tesla was forced to shift focus away from its solar business to meet production deadlines for the Model 3 sedan. He also blamed the pandemic for the poor performance of the company’s solar division.

Musk took the recusal for himself from board discussions, which plaintiffs maintained to be "superficial." Tesla founder said the board members negotiated the SolarCity deal and its economic terms without his influence or pressure.

"They work hard and are competent. They provide good advice and are rigorous in acting on behalf of shareholders," said Musk, describing his relationship with the board of directors as "good" ones, when he answered the question by his attorney, Evan Chesler.

Later on, the attorney for the plaintiffs, Randall Baron, warned Musk during cross-examination that the case was "going to be a grind."

Musk grimaced and replied that he "can tell by the binder," poking at the six-inch thick binder exhibit.

The court is going to decide whether Musk intentionally pushed the influence over the transaction. The trial is expected to last 10 business days. The case will be heard by judge Vice-Chancellor Joseph Slights III.