MUSK TRIAL ASKS THE $2-BILLION QUESTION: WHO CONTROLS TESLA?
Does Elon Musk control Tesla or does Tesla control Elon Musk?
More than $2 billion hinges on that question as a trial kicks off on Monday. Shareholders allege that Musk used his control of Tesla to force the company in 2016 to rescue Solarcity, saving the solar panel maker— and Musk’s investment in the company — from bankruptcy.
The union pension funds and asset managers leading the case want Musk to repay to Tesla the cost of the $2.6 billion deal and to disgorge the profits on his Solarcity stock. If they win, it would be one of the largest judgments against an individual.
Few executives dominate their company’s image as much Musk, known for taunting regulators, battling naysayers and personally engaging with his 57 million
Twitter followers.
Plaintiffs allege that Musk drove the negotiations and even pushed Tesla's board to raise, not lower, the price for Solarcity. A higher price benefited Musk, who was the largest shareholder of Solarcity, with a stake of about 22 per cent, as well as four members of Tesla's board, who directly or indirectly owned Solarcity stock, according to court records. They also allege the deal benefited two of Musk's cousins who founded Solarcity.
Musk has said he was “fully recused” from board negotiations and insisted that what plaintiffs see as evidence of control is little more than strong management. He has noted in court papers that the Solarcity deal has been a huge success for Tesla shareholders . After Tesla split its stock 5-1 in 2020, it has risen to $652 on Thursday from near $37 a share when the deal closed in November 2016.