Musk Wraps Up Trial Testimony Defending Role in SolarCity Deal
(Bloomberg) -- Elon Musk wrapped up two days of testimony in a Delaware trial over Tesla Inc.’s 2016 takeover of SolarCity, continuing to argue that the purchase was a sound decision and that it wasn’t done to benefit himself instead of shareholders.
Musk, the first and most central witness in the case, sparred repeatedly with opposing lawyer Randy Baron over the course of about eight hours on the witness stand, at one point telling him he was “bad human being” and saying his questions were “deceptive.”
The world’s second-richest man was the chairman and largest shareholder of both companies at the time of the deal, and the trial centers on how much of a role he played in pushing his board, and shareholders, to approve it. Investors and pension funds who are leading the suit allege that Musk and Tesla’s board breached their fiduciary duties when they agreed to a buyout of the then-struggling installer of rooftop solar panels. Musk is the lone defendant -- the rest of the board settled for $60 million last year.
The trial, which was delayed by the pandemic, is expected to take a total of two weeks. If Musk wins, and if the judge finds that the deal was a legitimate transaction, it will be another example of Teflon Elon largely escaping consequences. If he loses, Musk could be ordered to dig into his own pocket to hand back the roughly $2 billion that Tesla shelled out for SolarCity. It would also be a hit to his reputation as a tech titan who nearly always gets his way.
Baron, the attorney for the investors, spent much of Tuesday pressing Musk about his role in negotiating the price for SolarCity and played clips from videotaped depositions of bankers involved in the $2 billion deal. Musk largely kept his cool but was clearly frustrated with the line of questioning. “Your questions are so deceptive it’s silly,” Musk said at one point.
In his testimony Monday, Musk said he had little involvement in the board’s consideration of the SolarCity deal, but Baron noted Tuesday he’d hired lawyers to shepherd the the deal through, even though the Tesla board at the time wasn’t interested in it. The billionaire also held weekly meetings to spur the pace of due-diligence efforts needed for the SolarCity acquisition.
Musk said the deal was necessary to integrate solar power with Tesla’s battery. “Companies should only exist to create new products and services,” he said. “People sometimes lose sight of this. In order to create an integrated solar battery product we needed to be one company.”
He also argued that Tesla would have gained from the deal even if it had bought SolarCity and shut it down.
“The $3 billion of cash flows is 50% higher than the amount we paid,” Musk said. “Even if we had simply bought SolarCity and shut it completely down we would have gotten $3 billion in cash flows for $2 billion. This is a no brainer.”
Kimbal Musk, a Tesla board member and Elon’s younger brother, took the stand in Wilmington, Delaware, shortly after his older brother left. Eschewing his regular cowboy hat and sporting a gray suit, white shirt and blue tie, he told the court that the Tesla board was not controlled by Elon.
“We have a lot of debate, lots of interesting talented people on that board,” Kimbal Musk testified. “Compared to most companies I’ve ever been associated, it’s a very healthy board.”
He also said that the board had discussed acquiring SolarCity as early as 2006, saying it was a “long-term goal” to bring in a solar-power provider. Tesla’s board rejected earlier entries by Elon Musk to buy the company because they thought it would create too many distractions in the car-production process.
The case is what’s known as a shareholder derivative action, where shareholders are acting to protect the company. If the suit is successful, the proceeds go to Tesla, not to the shareholders who brought the suit.
Musk made some surprising statements on Monday, including saying that he didn’t enjoy being a CEO.
Musk’s plane, which had moved from Philadelphia to Wilmington, Delaware, earlier on Tuesday, took off for Brownsville, Texas, shortly after he left the courthouse. SpaceX is building its massive new Starship spacecraft in Boca Chica, Texas, south of Brownsville.
While Elon Musk is often followed by enamored fans of Tesla and SpaceX wherever he goes, there were few visible supporters in the courtroom this week. One man watched the trial in an “Occupy Mars” t-shirt, but otherwise the spectators were few. The trial had to be halted Tuesday for two hours because someone vomited in the courtroom.
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