Elon Musk, the key architect of the world’s leading electric vehicle (EV) manufacturer, Tesla Inc. or Tesla, will face a public hearing on a controversial deal next week in a famous court, Delaware Court.
On Monday, March 16, 2020, the CEO will defend a $2.2 billion worth deal against the allegations made by the company’s shareholders that the deal had benefited Musk at the expense of the company. Analysts suggested that Musk’s behavior in the courtroom would have an impact on the decision of the judgment of the public hearing.
The CEO of Tesla, Musk has been attacked by union pension funds and asset managers who claimed that they were betrayed about the company’s buyout of SolarCity in 2016 for a $2.2 billion deal. Tesla’s shareholders alleged that Musk bought SolarCity, an American rooftop solar energy company when the company was secretly on the brink of bankruptcy.
The shareholders argued that the rescue buyout had benefited Musk’s cousins who co-founded the firm and Tesla directors who held major stakes in the firm. Investors criticized that Musk, who then held the largest share in SolarCity and benefited most, should surrender his 2.2 million shares of Tesla worth about $1.2 billion which he received when he made the deal.
Musk has defended that Tesla’s stock has tripled since the deal and claimed to be innocent on the matter. He explained that SolarCity business has been lagged as its staff was focusing on launching the EV Model 3 sedan, a long-awaited product for Tesla, not because the solar business lacked value.
Meanwhile, the Tesla directors who were involved in finalizing the deal had made a settlement against the charges in January this year for $60 million, which was paid from insurance. Moreover, Musk would cost more than $1 billion if he is proved wrong on Monday’s proceeding.
Musk is also known for his outspoken nature and analysts explained that he has two sides in recent court proceedings, one as polite and respectful and other as provoking. Delaware’s Court of Chancery, which has its roots in medieval England and known for its decorum, led by Vice-Chancellor, Joseph Slights, who is an Adjunct Professor of Law of the Court, would decide the hearing.
Reuters described, “The court has its own cult-like following for its scholarly opinions that often run more than 100 pages and which have shaped Corporate America.” Hinting the grave situation in the court, John Coffee, a professor at Columbia Law School, reminded, “If you seem arrogant in court, you may be signing your own economic death warrant.”
Referring to the ignorant nature of business leaders in former trials, Jill Fisch, a Law School Professor at the University of Pennsylvania described, the company’s executives often faced a struggle with testimony when they were considered themselves as the smartest in the room. Fisch added, “That works against them in depositions and is even worse in court. It tends to piss off a judge.”
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