Tesla Investors Request Musk Pay Back $13B From SolarCity Deal

Tesla investors and shareholders requested Tuesday that a judge find Elon Musk coerced the company’s board into the 2016 acquisition of SolarCity and asked that he be ordered to pay the company back $13 billion.

Musk SolarCityPhoto Credit: Shutterstock

“This case has always been about whether the acquisition of SolarCity was a rescue from financial distress, a bailout, orchestrated by Elon Musk,” Randy Baron, an attorney for shareholders, stated to the Zoom hearing.

The 10-day trial concluded after Musk spent two days on the stand, defending his and the electrical vehicle company’s actions. Initially brought by union pension funds and asset managers, the suit accused Musk of “strong-arming” the Tesla executive board into approving the deal for the purchase of SolarCity, a company in which Musk was the top shareholder.

Musk argued that the acquisition was part of a larger plan to create a vertically integrated company that would revolutionize energy generation and consumption with SolarCity’s roof panels and Tesla’s cars and batteries. His attorneys also noted that SolarCity’s finances were similar to many high-growth tech companies at the time, not truly the “cash strapped” lemon company the plaintiffs wanted the court to believe.

At the time of the all-stock deal in 2016, it was valued at $2.6 billion, but since that time Tesla’s stock has risen exponentially.

Shareholder attorney Lee Rudy urged Vice Chancellor Joseph Slights of Delaware’s Court of Chancery to order Musk return the Tesla stock he received, which would be worth around $13 billion at its current price.

Shareholders claim that despite owning only 22% of Tesla, Musk was a controlling shareholder due to his ties to board members and domineering style.

Musk said in court papers that he had no power to fire directors or control their pay and he recused himself from price negotiations on the SolarCity deal. He and his lawyers claimed that the proposed award would be at least five times the largest award ever in a comparable shareholder lawsuit and described it as a “windfall” for plaintiffs.

Rudy responded by stating, “It would be a windfall for Elon Musk if he got to keep shares he never should have gotten in the first place.”

Chesler called the request “preposterous” and noted that it blatantly ignores five years of unprecedented success at Tesla, heavily driven by Musk.

“Without Elon Musk, Tesla might not exist let alone have a $1 trillion value. That doesn’t make him a controller. That makes him a highly effective CEO.”

Vice Chancellor Slights, who is retiring after this case, expects to rule in about three months.

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