On Jan. 19 EST, some Tesla shareholders took the company's CEO Elon Musk to court, saying Musk coerced the company's board of directors into a deal to buy solar power company SolarCity in 2016 and demanded repayment of $13 billion.
Musk defends himself against charges of "orchestrating" a board takeover
At a hearing in the case, plaintiffs' lawyers said the central argument in the lawsuit was whether Musk's encouragement of the board to buy SolarCity was a "calculated rescue from financial distress" - a way to ease SolarCity's financial crisis at the time. financial crisis. Specifically, the plaintiffs argue that Musk pressured the board into agreeing to Tesla's acquisition of the then cash-strapped SolarCity, of which Musk was a majority shareholder.
In 2016, Tesla reportedly bought SolarCity for $2.6 billion via stock, and Tesla's stock price began to soar afterward. The plaintiff wants the court to order Musk to return the Tesla stock he acquired as a result of the deal, which amounts to about $13 billion at current prices.
Musk's side does not agree with the plaintiff's complaint. Ske, through his lawyer, said the deal to buy Solarcity was part of a long-term plan to create a vertically integrated company. The lawyer said at the hearing that the deal was not intended to bail out SolarCity and that the financial situation was similar to many high-growth technology companies that are not on the verge of bankruptcy.
In addition, Musk said in court filings that such a large settlement is at least five times the size of similar lawsuits, and that the money would be a "windfall" for the plaintiffs if it were to be returned.
But the plaintiffs' lawyers argued that the acquisition was a "windfall" for Musk, who should not have received the shares from the start. In addition, the plaintiffs point out that Tesla was preparing to launch the Model 3 at the time of the SolarCity acquisition, so the shareholders argue that the deal would have distracted the company and put more of a burden on Tesla.
In addition, the shareholders claim that Musk effectively controls the company due to his close relationship with board members and his strong personality, despite holding only 22% of Tesla's shares.
Outside analysis suggests that if the plaintiffs can prove that Musk manipulated the board on this point, the court is likely to find the deal unfair to shareholders. Musk, on the other hand, has been telling the court that the deal with SolarCity was primarily handled by Tesla's board of directors, and that he himself recused himself from the price negotiations.
Another lawyer representing Musk said, "Without Musk, Tesla would probably be dead, with no chance of reaching a $1 trillion market cap as it is today. This does not mean that Musk is the one in control, but rather proves that he is the efficient CEO."
And when he attended Tesla's acquisition of SolarCity in July 2021 to defend himself, Musk said he "hated being the boss of Tesla" and preferred to spend his time on design and engineering, except that Tesla needed him. "Without me Tesla would be 'finished'," Musk said.
Tesla was founded in 2003 and successfully went public in late June 2010. The IPO price was $17 per share, and by the end of the last trading session, Tesla shares had reached $1,030.50 per share, with a total market value of $1.03 trillion (about 6.6 trillion yuan). Since the IPO, Tesla's share price has risen nearly 27,000%, far exceeding Amazon, Apple and other big-name technology stocks, but also the traditional car companies GM, Ford far behind.
Sued by shareholders for the second time in two months
Musk has always been known for his outspoken and straightforward personality, which has almost become a gold standard for him. But such a character and behavior has also gotten him into a lot of trouble.
In December 2021, Musk was sued by shareholders less than a month before he tweeted on November 6 last year to vote on whether to reduce his 10% of Tesla shares, causing Tesla's share price to plummet.
Some of Tesla's shareholders have asked the court to see the company's internal documents and to investigate whether the vote violated a previous agreement with the U.S. Securities and Exchange Commission. It is understood that as part of the compensation plan, Musk received a stock option award of 22.8 million shares in 2012 with an exercise price of $6.24 per share, and these options will expire in August 2022. Since this stock is treated as an employee benefit or compensation award, Musk is required to pay income taxes on the proceeds received from the exercise of the options.
The option to support Musk's stock sale was supported by 57.9% of voting participants, and Musk then began to sell off a large amount of Tesla stock, causing Tesla's stock price to jump repeatedly sideways between $1,000 and the market value to fall to less than $1 trillion at one point, while Musk has frantically cashed out nearly $80 billion.
Over the years, Musk has made many statements on Twitter, many of which have directly impacted the market.
For example, back in 2018, Musk tweeted that he would take Tesla private at $420 per share, causing Tesla shares to plummet. The U.S. Securities and Exchange Commission subsequently launched an investigation into this. Eventually, Musk reached a settlement with the SEC, agreeing to get approval from the company's lawyers before posting tweets with material information about Tesla.
But despite this, Musk has continued to tweet a lot.
On Jan. 14 this year, Musk tweeted that Tesla merchandise would accept payment in dogcoin. At one point, dogcoin surged nearly 20%. In fact, due to Musk's frequent mentions and "bandwagoning," dogcoin has soared 870%, once overtaking cryptocurrency "big players" Bitcoin and ethereum.
Ask longtime law firm to fire lawyers or lose Tesla business
Tesla has been making a lot of moves recently - buying up mines in Chile and Mexico to lock in important raw materials for electric car batteries since it reported positive results in the fourth quarter of last year and its stock price has soared. And in legal matters, Musk is also not at all soft.
This Sunday (January 16), the Wall Street Journal exclusively reported that Tesla's lawyers submitted a document to its partner, Cooley LLP, asking it to fire a lawyer or lose Tesla's business.
It is reported that Tesla this time hope that Cooley fired the lawyer had worked in the U.S. Securities and Exchange Commission (SEC). And Tesla as well as Musk and the agency has been very tense relationship.
According to U.S. media reports, Cooley & Associates did not agree to the request, the lawyer is still one of the firm's partners. In light of this, Tesla has replaced lawyers from Cooley & Associates in several recent lawsuits, and SpaceX, another Musk company, has also stopped using the firm's lawyers for litigation or oversight work.
The reporter checked the information and found that in 2018, Tesla was investigated by the SEC for the above-mentioned issue of Musk considering privatizing his equity in Twitter, and eventually, Musk and the SEC reached a settlement on related matters, with Musk paying a fine of $20 million and also resigning from his position as chairman of Tesla as a result.
The lawyer from the Kubo law firm, who was asked to be fired, was on the investigation team at the time.
Musk's thunderous style has brought him both cheers and scorn, but it seems that the company needs to reign in some of its sharp edges in the long run.