Musk on trial: Defends SolarCity, calls lawyer ‘bad human’
WILMINGTON, Del. (AP) – Tesla founder Elon Musk took the stand on Monday to defend his company’s acquisition of a troubled company called SolarCity in 2016 against a lawsuit alleging he was responsible for a deal, which was full of conflicts of interest and never delivered the promised profits.
And to nobody’s surprise, the famous colorful billionaire did so in the most personally combative of terms.
“I think you are a bad person,” Musk told Randall Baron, a shareholder attorney, who urged Musk to admit the mistakes he supported in acquiring SolarCity, a manufacturer of solar panels.
“I have great respect for the court,” added Musk later, “but not for you, sir.”
The long-standing shareholder lawsuit alleges that Musk, who was the largest shareholder and chairman of SolarCity, and other Tesla directors violated their fiduciary duties by bowing to Musk’s wishes and agreeing to buy the company. In what the plaintiffs call a clear conflict of interest, SolarCity was founded by Musk and two of his cousins, Lyndon and Peter Rive.
On Monday, Baron tried in the Delaware Court of Chancery to determine that Musk had attempted to run Tesla without interference and is therefore responsible for any failures. The lawyer showed a video clip in which Musk said he likes running his own businesses because he doesn’t want anyone to make him do what he doesn’t want.
As an example of Musk’s bossy management style, Baron cited the fact that the CEO once referred to himself as “Technoking of Tesla” and gave his chief financial officer the title “Master of Coin” – a reference to HBO’s “Game of Thrones”. “- in a filing with the Securities and Exchange Commission.
The hostility between the billionaire CEO and the plaintiffs’ attorney dates to at least 2019 and a testimony in which Musk insults Baron and questions his professionalism. On Monday, Baron replayed excerpts from that statement in an attempt to depict Musk’s stance on what he might consider criticism.
Musk pushed back, insisting that “I don’t want to be the boss of anything.”
“I prefer to spend my time designing and engineering,” he said.
Musk, known for rejecting skepticism about himself or his company, insisted that he welcome criticism:
“If I’m wrong,” he said on the witness stand, “I consider critical feedback a gift.”
Musk said his quirky titles and other jokes simply reflect his sense of humor.
“I think I’m funny,” he offered.
In addition, the resulting media attention often plays in Tesla’s favor.
“When we’re entertaining, people write stories about us,” and the company can save on advertising. “
Regarding Tesla’s full acquisition of SolarCity shares, Musk claimed that he would have no financial gain from it because he owned shares in both companies.
Musk also argued that SolarCity’s failure to meet aggressive sales forecasts and the loss of market share were only temporary setbacks. He said they reflect his decision to redirect Tesla resources to saving the production of the Tesla Model 3 electric car – and then walking “head first into a pandemic”.
Efforts to save Tesla 3 were “hands on deck” – so desperate that even the company’s lawyers were involved in the effort, Musk said, causing laughter in court.
Musk’s defense stated that SolarCity was already included in Tesla’s 2006 master plan for the electric car maker. He alleged that the merger of the companies was not an emergency rescue 10 years later, as the plaintiffs alleged.
However, Baron pointed out that the 2006 document only mentioned a potential marketing agreement, not a full merger or acquisition between Tesla and SolarCity.
Baron repeatedly urged Musk for evidence that SolarCity had run into trouble prior to the Tesla buyout – cash short, no funding possible, risk of violating terms of an existing loan agreement.
Musk did not admit anything. He argued that if SolarCity had wanted, it could have raised money by issuing shares. And he noted that fast-growing young companies, including Amazon and Tesla themselves, often bleed money in their early years before later succeeding.
Why, Baron asked, did another Musk company, Space X, forego its own investment guidelines to buy risky SolarCity bonds? Musk replied that these bonds offered better payouts than bank accounts that paid little more than zero.
“I had confidence,” said Musk, “in the future of SolarCity.”
Baron was trying to find out if Musk had pulled out of Tesla-SolarCity negotiations to avoid a conflict of interest.
“I didn’t have a material role,” said Musk.
“What is a ‘material role’? “Baron fired back.” That sounds like a loose word to me.
“You’re the expert on loose words,” countered Musk.
The process, which began Monday, marks the culmination of seven shareholder lawsuits, which were merged into one, alleging that Tesla directors violated their fiduciary duties by bowing to Musk’s wishes and agreeing to buy SolarCity. Last August, a judge approved a $ 60 million settlement that settled claims against all directors on Tesla’s board of directors except Musk without admission of fault.
That left Musk, who refused to reach an agreement, as the only remaining defendant. The trial, which began on Monday, was scheduled for March last year but has been postponed because of the virus pandemic.
Daniel Ives, an analyst at Wedbush Securities, has described the acquisition as a “clear black eye” for Musk and Tesla, largely because SolarCity did not make a profit.
“Basically, it was about putting good money after bad money,” said Ives. “With all the successes and all the unimaginable heights that Musk has reached, this is one of the lowlights.”
Even if the process ends with Musk personally paying for the entire SolarCity deal, $ 2.5 billion won’t hurt the world’s third richest person much. Forbes magazine has estimated Musk to be worth about $ 163 billion.
Krisher contributed from Detroit.
Paul Wiseman and Tom Krisher, The Associated Press