Tesla’s (TSLA) - Get Report Elon Musk and his legal team will face off against some of Tesla’s bigger shareholders on Monday to defend against allegations that the billionaire founder and controller of the world’s biggest electric carmaker orchestrated the 2016 bailout of solar panel maker SolarCity.
The two-week trial, taking place in the Court of Chancery in Wilmington, Delaware, pits Musk against pension funds and asset managers who allege the billionaire used his control of Tesla to force the company in 2016 to rescue solar panel maker SolarCity, saving it 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.
The case will boil down to whether Musk, who owned about 22% of Tesla at the time of the deal, is that rare controlling stockholder who does not actually hold a majority stake - something analysts and experts allege occurred under Musk's oversight.
The trial is yet another public relations snafu for Musk, who has been in the spotlight this year for everything from pumping up Bitcoin and Dogecoin on social media and on live television to Tesla crashes allegedly involving the company's self-driving software to allegations of Tesla video cameras collecting Chinese military data.
Musk has said he was "fully recused" from board negotiations and that shareholders voted to approve the deal because it was central to his "Master Plan, Part Deux" that aims to integrate sustainable solar energy with electrification.
"Taken to its natural conclusion, virtually all 'hands-on' and 'inspirational' CEOs with minority stock ownership would be deemed controllers," Musk's lawyers wrote in a court filing.
Musk has also noted in court papers that the SolarCity deal has been a huge success for Tesla shareholders, demonstrating the deal was not only fair, but a boon. After Tesla split its stock five-for-one in 2020, it has risen to $652 from near $37 a share when the deal closed in November 2016.
At last check, shares of Tesla were down 0.74% at $647.97.