Elon Musk told a judge that the Tesla Inc had to buy SolarCity in 2016. This is because the failing solar panel company was essential to the electric vehicle maker’s long-term goal of accelerating the transition to sustainable energy. The chief executive completed about eight hours of testimony over two days to defend himself against a lawsuit brought by union pension funds and asset managers. They had alleged that he strong-armed Tesla directors into buying the cash-strapped SolarCity for $2.6 billion.
Musk at the time owned a 22% stake in both Tesla and SolarCity. The Tesla shareholders want Musk to be ordered to return the value of the deal to Tesla. Musk completed his testimony by fielding several questions about the timing and necessity of the deal from Vice Chancellor Joseph Slights. He is the judge who will decide if Musk is liable. Musk said that Tesla was struggling in 2016 to develop its Powerwall battery system. And that was because of its difficulty to integrate with other solar power systems.
Musk told the judge that if they have a whole bunch of third-party solar systems, it’s a messy situation. They needed solar within Tesla. Shareholders have questioned the need to buy SolarCity and asked if other solar companies were considered as acquisition targets. Musk has consistently told the court that the Tesla board primarily handled the SolarCity deal. In response to questions from his own lawyer Evan Chesler, who was trying to show Musk did not dominate board discussions, Musk noted his suggestion was overruled at that meeting.
Baron asked Musk to explain why he reviewed deal packets for the Tesla board before they were sent to directors. By this he indirectly suggested that the CEO was controlling the flow of information. Musk testified that it is a part of the board process to make sure they have full and accurate information. Musk repeatedly defended the SolarCity deal by saying that the company had to be quickly acquired or find financing to solve its dangerous cash shortage.
Legal experts said that the judge will be looking for evidence that Musk threatened board members. Elon Musk’s brother Kimbal, who is listed in court documents as a witness for both sides, was asked by the plaintiffs’ lawyers if he thought his brother’s actions in regard to the SolarCity deal were appropriate considering he said he recused himself. Kimbal Musk responded that he did not understand how a CEO could be recused from deal negotiations. Kimbal Musk, other board members and others involved in the 2016 deal will testify for the duration of the trial. The company’s directors settled allegations from the same lawsuit last year for $60 million, paid by insurance.
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