Elon Musk defended his company’s $2.6 billion acquisition of SolarCity in Delaware court on Wednesday, July 14, 2021. He claimed that the merger would save Tesla from “a looming threat” and provide a superior alternative.
Musk, Tesla’s Chief Executive Officer, took the stand during a trial between Tesla and shareholder William Chamberlain of Arkansas. The suit claims that Musk was not acting in shareholders’ best interests when he advocated for the acquisition of SolarCity, a solar power company founded by his cousins.
During Musk’s testimony, U.S. District Judge Beth Labson Freeman asked him to clarify why he brought the two companies together. Musk responded that he believed Tesla would be better off as a result. He also said that it would provide a sustainable alternative.
Musk’s testimony will continue on Thursday. The shareholder trial hinges on a proposal in Tesla’s 2016 merger proxy statement. It requires Musk to recuse themselves from future votes on certain corporate matters. Under the agreement, Musk should follow Tesla’s directions on some issues and cannot seek to change the company’s direction.
While Musk was not expected to testify, he surprised observers when his attorneys filed a motion on Dec. 11 to enter the CEO as an expert witness in his defense. The trial marks the latest bump in Tesla’s road to the SolarCity acquisition, which Musk announced in June 2016. The deal got referred to the Committee on Foreign Investment in the United States, a national security panel, for review.
Musk and other Tesla executives have said that the deal would not have been possible if it had not gotten approved. Tesla shareholders voted overwhelmingly to approve the deal despite concerns about the acquisition’s structure and conflicts of interest.
Chamberlain filed a proposed class-action lawsuit in Delaware Chancery Court on Dec. 16. They alleged that Musk had broken his fiduciary duties and failed to hold an auction for shareholders. The suit, which seeks unspecified damages, also claims that Tesla did not complete a required stockholder information statement before the merger.
The defendants are Tesla, Musk, and Gracias. Tesla filed a motion asking to have the case dismissed on Feb. 12, saying that it did not violate any of its commitments to shareholders. Tesla’s attorneys, John Murphy from the firm Skadden and Greg Christie from Latham & Watkins, will present opening statements.
The shareholder’s attorneys, Mark Fife from the firm Labaton Sucharow and co-lead counsel Adam Levin of Pomerantz, will present opening statements. The trial will last through the week.