Elon Musk came to court on Monday to defend Tesla Inc’s acquisition of SolarCity in 2016 against a lawsuit by shareholders seeking to recover the $2.6 billion the company paid for the struggling solar panel maker.
Musk is scheduled to take the stand this morning, kicking 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 from union pension funds and asset managers alleges that Tesla’s board of Tesla’s famous CEO should buy SolarCity when it was about to run out of money. Musk owned a 22% stake in SolarCity, founded by his cousins.
The shareholders asked the court to order Musk, one of the richest people in the world, to return to Telsa what he spent on the deal, which would represent one of the biggest judgments ever made against an individual. However, even if the judge finds that the deal was illegal, he could award a much smaller amount of damages.
Musk claimed that the deal was fair and that it was negotiated by Tesla’s board free of its influence and approved by fully informed shareholders.
He lauded the deal at the time as central to his “Master Plan, Part Deux,” which aims to reshape transport using sustainable energy to power fleets of autonomous electric vehicles.
Legal experts said the judge will look for proof that Musk warned board members or that the directors could not stand up to him.
The shareholder lawsuit accuses Musk of dominating the deal discussions, forcing Tesla to pay more for SolarCity and misleading shareholders about the solar panel maker’s deteriorating financial health.
At the heart of the case will be accusations that Musk, who had a 22% stake in Tesla at the time of the deal, was still a controlling shareholder. If it were, it would impose a severer legal standard and increase the likelihood that the deal would be unfair to shareholders.
“It would be a surprise to most people if the court came and said he doesn’t control here,” said Brian Quinn, a professor at Boston College Law School. “Because he certainly acts as he does.”
Musk is to be questioned by attorney Randy Baron, whom Musk called “reprehensible” in an angry statement in 2019, during which he also accused Baron of attacking sustainable energy, according to a transcript.
When Baron asked if Musk defended SolarCity, Musk replied, “You are a shameful person.”
