Tesla (TSLA) CEO Elon Musk Defends SolarCity Acquisition with Potentially Conflicting Testimony

July 12, 2021 5:01 PM EDT

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Tesla (NASDAQ: TSLA) CEO Elon Musk testified in court Monday in an ongoing shareholder lawsuit over the company’s $2.6 billion acquisition of SolarCity made in 2016. A group of shareholders allege the acquisition was a “bailout” of the failing solar company. The plaintiffs say SolarCity “had consistently failed to turn a profit, had mounting debt, and was burning through cash at an unsustainable rate.” The shareholders are seeking repayment to Tesla of the cost to purchase SolarCity.

Musk testified that he disagreed that there was “significant evidence” SolarCity was struggling with cash management. However, an email from SolarCity’s CEO contradicts Musk's testimony. The email, sent in early July of 2016, stated that the company was under a cash crunch during the time in question.

The other board members named in the suit — Robyn Denholm, Ira Ehrenpreis, Antonio Gracias, Kimbal Musk and Stephen Jurvetson — settled for $60 million last year. Musk’s lawyers say that he recused himself from board discussions and negotiations relating to the acquisition — but the plaintiffs maintain that the recusal was “superficial.”

Attorney for the plaintiffs, Randy Baron, began cross-examining Musk. Baron started by showing clips of Musk’s 2019 deposition, in which Musk repeatedly called the suit a waste of time and said Baron was a “shameful person.” Baron discussed the deposition with Musk during testimony, asking if the CEO was being “derisive”. “I think you are a bad human being,” Musk responded. He said Baron was “mentored by criminals, then continued to be mentored by criminals.”

The trial is expected to last 10 days and will address whether Musk acted in the best interests of Tesla’s shareholders or whether he was making and urging decisions that would primarily benefit himself.

By Michael Elkins | Michael.Elkins@streetinsider.com

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