Tesla CEO Elon Musk will go to court on Monday in a lawsuit that if he loses he could have to pay $ 2 billion of his considerable personal fortune, CNBC reports, according to news.ro.
Musk will be the first witness in a lawsuit in which he will defend his role in Tesla’s $ 2.6 billion acquisition of SolarCity.
Shareholders sued Musk and Tesla board members, arguing that the 2016 deal was tantamount to saving SolarCity.
They also allege that the takeover unjustly enriched the Musk family, who were among the largest shareholders, and that Musk and others failed to disclose all relevant details and breached their fiduciary responsibilities.
Musk insisted that he “totally refused” to negotiate the deal.
Last year, board members appointed to the lawsuit entered into a $ 60 million deal with Tesla shareholders without admitting wrongdoing.
Musk, the second richest person in the world, was the only defendant who chose to take the fight to court. There is no jury to be convinced in this case.
The outcome of the trial will be determined by Judge Joseph Slights III of a Delaware court
Musk had his share of legal issues beyond SolarCity. For example, the SEC sued him in 2018 for fraud, and Musk and Tesla struck a deal to close the lawsuit, paying $ 20 million each.
The allegations came after Musk wrote on Twitter that he had reached an agreement to withdraw Tesla from the stock market for $ 420 a share, a move that raised Tesla’s share price.
Musk had to temporarily step down as president of Tesla as one of the terms of the deal.
In a separate case, he emerged victorious after caving expert Vernon Unsworth said Musk defamed him when Tesla’s CEO called him a “pedo guy” on twitter.
His lawyers argued that the phrase “pedo-type” was a heated rhetoric and not a statement of fact.
Tesla and Musk are facing many other lawsuits, including Musk’s unprecedented compensation package for CEO and a series of federal investigations, according to the company’s financial reports.
In the case of SolarCity, the judge will have to decide whether Musk was a conflicting major shareholder in managing the acquisition of SolarCity.
In other words, did Musk act or not in the interest of Tesla shareholders? And did Musk tell shareholders everything they needed to know?
Known as shareholder derivative action, this type of lawsuit is filed by investors on behalf of a corporation, rather than by individuals or funds. If the claimants win, the proceeds may go to Tesla and not to the interested parties who initiated the lawsuit.
According to court documents, Musk owned 22.1% of Tesla’s common stock at the time of the transaction and 21.9% of SolarCity.
SolarCity was a troubled asset that lost cash in the residential solar panel installation market.
Musk’s lawyers are expected to argue that the SolarCity agreement did not affect shareholders at all and that they voted overwhelmingly to approve the acquisition. After all, Tesla shares rose from a closing price of $ 43.92 on June 21, 2016 – when Tesla announced it would bid for SolarCity – to a closing price of $ 656.95 on July 9, 2021 (Friday ), after an operation of division of shares in a ratio of five to one, carried out last year last year.
The company is also currently included in the S&P 500 index and reports profits on a regular basis.
SolarCity was founded and run by Musk’s cousins Lyndon and Peter Rive, but was supported by Musk, who served as chairman of the board. Meanwhile, Musk also became CEO of Tesla, as well as the company’s president.
This was not his only potential conflict. SpaceX, Musk’s aerospace company, invested $ 255 million in SolarCity bonds from March 2015 to March 2016. Four Tesla board members directly or indirectly owned SolarCity shares at the time of the acquisition. Some members of Tesla’s board of directors also held shares in SpaceX and were on its board of directors.
The process is expected to run until July 23, 2021, unless entities seek a settlement before completion.
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