Tesla investors urge judge to order Musk to pay $13 billion for SolarCity deal

“The case has always been about whether the acquisition of SolarCity was an escape from the financial crisis, a bailout, orchestrated by Elon Musk,” Randy Baron, a lawyer for shareholders, told a Zoom hearing.

The closing arguments recall key findings from a 10-day trial in July when Musk spent two days on the stand defending the deal.

The lawsuit by the Union Pension Fund and Asset Managers alleges that Musk strengthened the Tesla board to approve a deal for cash-strapped SolarCity, of which Musk was the top shareholder.

Musk has countered that the deal was part of a decades-old master plan to create a vertically integrated company that would replace energy production and consumption with SolarCity’s roof panels and Teslaof cars and batteries.

One of the lawyers representing Musk, Evan Chesler, told the hearing that the deal was not a bailout and that SolarCity was far from bankruptcy and that its finances were similar to those of many high-growth tech companies.

“They were creating billions of dollars of long-term value,” Chesler said of SolarCity.

The all-stock deal was valued at $2.6 billion in 2016, but Tesla’s stock has soared since that time.

Shareholders Attorney Lee Rudy urged Delaware Court of Chancery Vice Chancellor Joseph Slights to order Musk to return the Tesla stock he acquired, which would be worth about $13 billion at its current price.

Musk said in court papers that such an award would be at least five times the largest award ever made in a comparable shareholder lawsuit and called it a “windfall” for the plaintiffs.

Rudy said Slights should consider Musk’s contempt for the statement and trial process, in which he repeatedly clashed with shareholder attorneys and insulted them.

“It would be an unexpected event for Elon Musk if he gets to hold shares he should never have before,” Rudy said.

Chessler called the request to order Musk to withdraw stock from the deal “absurd” and said it overlooked five years of unprecedented success at Tesla.

Tesla shares were down 1% at $1,040 in afternoon trading.

Tesla acquired SolarCity as the electric vehicle maker neared the launch of its Model 3, a mass-market sedan that was key to its strategy. Shareholders alleged that the deal was unnecessarily distracting and that Tesla was burdened by SolarCity’s financial woes and debt.

Shareholders claim that despite owning only 22% of Tesla, Musk was a controlling shareholder because of his ties to board members and the domineering style. If the plaintiffs can prove it, it increases the likelihood that the court will conclude that the deal was unfair to shareholders.

Musk’s lawyers said the celebrity entrepreneur had no power to sack the directors or control their salaries and recused himself from price talks on the SolarCity deal.

“Without Elon Musk, Tesla could not exist, let alone $1 trillion worth,” said Vanessa Lovely, an attorney for Musk. “It doesn’t make him a controller. It makes him a highly effective CEO.”

Slights ended the hearing by saying he expected to rule in about three months.

He said last week he intends to retire in the coming months and that a related shareholder lawsuit challenging Musk’s record salary package was moved from Slights to another judge.

This story has been published without modification in text from a wire agency feed. Only the title has been changed.