Tesla chief executive Elon Musk is set to go to trial over Tesla’s purchase of SolarCity in 2016, although the start of the trial has been postponed from its scheduled start this week due to the coronavirus pandemic.
According to Reuters, shareholders claim that SolarCity was secretly on the brink of bankruptcy when Tesla purchased the company for $2.2 billion. It is argued the deal benefited Musk as SolarCity’s largest shareholder, his cousins who co-founded the firm, and Tesla directors who owned stakes in SolarCity.
Investors are calling on Musk to surrender the 2.2 million shares of Tesla he received in the deal which as of Thursday last week, were worth approximately $1.2 billion.
Musk claims that Tesla has demonstrated its value as its stock has tripled since the deal. He added that SolarCity withered not because the solar business lacked value but because staff were redirected to launching the Tesla Model 3.
The case will be heard in Delaware’s Court of Chancery and it’s believed Musk behaviour in court could have a significant impact on the outcome.
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Reuters reports that during a June deposition, Musk repeatedly clashed with shareholder lawyer Randy Baron and asked the lawyer if he was motivated only by money. By comparison, Musk “spoke softly on the witness stand” during his defamation trial in December and apologized to the cave diver he referred to as a “pedo guy.” The entrepreneur’s calm demeanour likely had an impact on the jury ruling in his favour and rejecting the $190 million claim against him.
“If you seem arrogant in court, you may be signing your own economic death warrant,” securities professor at Columbia Law School, John Coffee said.
