Elon Musk, the second richest man in the world might become the third richest if he loses $2 billion or more of his personal money after an appearance in court on Monday, July 12. The CEO of Tesla will face tough questions in court as the long-delayed trial on the controversial acquisition of Solar City is set to begin in Delaware.
The lawsuit, brought by investors and pension funds, alleges that Musk and the Tesla board contravened the interests of shareholders when they decided to acquire Solar City. They called it a bailout. They also say that the sale of the company to the EV tech giant enriched the coffers of the Musk family.
Last year board members of Tesla, reached an agreement with the shareholders and settled the suit for $60 million. However, Musk held out and chose to go to court as the only defendant. Delaware Chancery Court’s Judge, Vice-Chancellor Joseph Slights III will rule on the suit.
The judge will make a decision on whether Musk was a conflicted controlling shareholder or not. He will also have to rule whether Musk met the “entire fairness” standard as he handled the Solar City acquisition as the Chief Executive Officer of Tesla.
Unsealed court documents revealed that Musk knew about the “liquidity crisis” that was faced by Solar City. In 2016, he had also hyped a non-functional design prototype of solar panels by presenting them as a production ready prototype of the company.
Musk was the chairman of the board of Solar City, a company founded and run by his cousins Lyndon and Peter Rive. He was also the chairman of Tesla, the company which bid $2.8 billion to buy Solar City. He was also the CEO of SpaceX at the same time. SpaceX reportedly owned a huge amount of Solar City’s debt. All this allegedly suggests a conflict of interests.
Elon Musk has faced a slew of court cases; winning some and losing some and waiting for some to be heard. This suit is a shareholder derivative action suit. If the plaintiffs win, the proceeds may not be given to them. Instead, it will be given to the company. If he loses or settles, the proceeds will come out of his huge personal fortune and could cost him over $2 billion. It might be the largest individual settlement ever.
By Smartha Feb, 2019: Elon Musk – famous founder, CEO and entrepreneur, engineer, Lead Designer. Vector minimalist portrait. SpaceX rocket BFR Starship and Mars vector retro style illustration. Future is Now art