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Live Updates: Elon Musk On Trial Over Solar City Acquisition

Tyler Durden's Photo
by Tyler Durden
Tuesday, Jul 13, 2021 - 03:11 PM

We will be updating this post with notes and analysis as the trial progresses:

Tuesday, 7/13/2021

  • 1504 EST: Wrapping up, when Musk was asked "Why SolarCity" by the judge, he responded it was an industry leader and the solar company he knew best, per BBG. Bloomberg's TopLIVE blog also notes that "Randy Baron, the main lawyer for the shareholders who sued Musk, appeared to gain some traction in his effort to corner Musk about how great a role he played in the SolarCity deal". Musk maintained - hilariously - that "the SolarCity acquisition was critical to Tesla’s success as a fully integrated clean-energy company and not a bailout," which is likely what prompted the judge's line of questioning. "The day was again marked by Musk’s combative but cool approach to Baron’s questions," the blog concluded. 

  • 1406 EST: Musk has finished testifying.

  • 1402 EST: The judge is now asking questions of Musk, asking about power generation and storage and whether that business was consistent with Tesla's business at the time. Its the first "substantive questioning" from the judge, Bloomberg notes. WaPo's Will Oremus writes: "Musk insists the solar roof time table really was optimism, not intentional deception. Musk: 'If I wasn't optimistic, I don't think I would have started an electric car company or a rocket company. A certain amount of optimism is necessary for such endeavors.'"

  • 1334 EST: Bloomberg reports that Musk, when asked on redirect about TSLA short sellers said Tesla was the most shorted company “in the history of the stock market. Ever.”

  • 1329 EST: After the puke break, Musk’s attorney, Evan Chesler, is now asking about the company’s various general counsels on redirect. One by one, he is walking through them, asking Musk if he had fired them. One by one, Musk is saying no and repeatedly reminding that the workload at Tesla is “extremely high”. Per BBG, the line of questioning seems to be directed at dismantling the notion that Musk had ever “rage fired” anyone — something that Plaintiff counsel Randy Baron alluded to in questioning yesterday.

  • 1130 EST: BBG reports “A court security officer says the courtroom is closed for two hours after a person threw up. The recess was called because someone vomited in the courtroom, a court official confirms. We don’t know who.”

  • 1100 EST: WaPo’s Will Oremus writes: “Musk has kept his tone of voice calm, while his words & facial expressions often convey exasperation. Today he told Baron, ‘Your questions are so deceptive it's silly.’ And another time, when he caught Baron out on a numerical claim: ‘You're shooting yourself in the foot here.’”

  • 1056 EST: Baron is making inroads on proving that Musk was involved in the SCTY deal he claims he recused himself from, per BBG. The lawyer “play[ed] tape of a deposition in which an executive of the investment banking advisory firm Evercore testifies that, on a July 2016 call with Musk, she found him ‘very concerned about the pace of due diligence’ for the deal.” BBG reports that in the clip, Courtney McBean, senior managing director with Evercore, said Musk “was going to see what he could do about the diligence request” and “would make the company move faster.” Musk claims Baron is trying to conjure up a conspiracy and that he had “almost no interaction” regarding the deal.

  • 1026 EST: Plaintiff attorney Baron is digging at the idea that "Musk saw a flailing company in SolarCity -- in which he held about 22% of the stock -- and rushed to offer a deal as a bailout to serve his own interests at the expense of Tesla investors," per Bloomberg legal editor Peter Jeffrey. 

  • 1010 EST: "Musk has been pretty calm so far this morning but is starting to show signs of frustration, shaking his head and telling Baron his questions are 'so deceptive'," writes Bloomberg legal reporter Chris Dolmetsch. Earlier he wrote that Musk and plaintiff attorney Randy Baron had sparred "about the CEO’s involvement in the negotiations over the price of the SolarCity offer" and that "Musk denied taking part in 'any substantive discussions' about the potential stock exchange ratio for the offer".

  • 1000 EST: Bloomberg writes that as Musk resumes his testimony this morning there were "plenty of empty seats" and "almost no press in front of the courthouse in the morning". Musk began by "emphasizing his point that the combination of Tesla and SolarCity was needed in order to create an 'integrated solar battery product.'," Bloomberg reports. 

  • 0915 EST: Court is set to resume at 9:15 AM EST. 

  • 0814 EST: Ari Levy, Senior Technology Editor for CNBC, told WGRZ yesterday about Solar City that "It was burning cash - it was a very capital intensive business. It wasn't clear what their path to profitability was at the time. And so the view by many shareholders was that well this was actually a bailout of Solar City. It was Elon bailing out himself and his family members by pulling Solar City into Tesla."

  • 0800 EST: Testimony from Elon Musk is expected to continue today, followed by testimony by his brother, Kimbal Musk. 

Monday, 7/12/2021

  • 1709 EST: StreetInsider wrapped up Musk's most potentially conflicting testimony during his first day on the stand by stating: "Musk testified that he disagreed that there was 'significant evidence' SolarCity was struggling with cash management. However, an email from SolarCity’s CEO [to Musk] contradicts Musk's testimony. The email, sent in early July of 2016, stated that the company was under a cash crunch during the time in question."

  • 1649 EST: Dana Hull reports that the day has wrapped up and Elon Musk will be back on the stand tomorrow, followed by his brother, Kimbal Musk. 

  • 1622 EST: GLJ Research's Gordon Johnson is out with a note that cites a "fairly seasoned legal expert" in predicting the outcome of the trial. The note reads: “I haven’t followed the paperwork in this case closely, but my view from a distance is that he will almost certainly lose or settle for a huge sum. The judges on that court are phenomenal, and the judge will decide the case (no jury) and it seems clear from indisputable documentation that Musk should lose. I would put this case in the same category as someone getting caught breaking into a house on a high resolution security camera.  Lie all you want; you are going to lose if you go to trial.”

  • 1534 EST: Delaware Online’s Isabel Hughes writes: “Dispatch from the Elon Musk trial thus far — not a whole lot of the nitty-gritty (legal) arguments in here because they’ve barely touched on the issues and instead have focused on sparring, including why Musk doesn’t like the plaintiff’s attorney.”

  • 1510 EST: Musk's testimony may run into tomorrow, depending on how questioning goes for the rest of the day today.

  • 1454 EST: Musk is repeatedly rebuffing questions about what he knew about SolarCity’s cash crunch by saying that "he made it clear that the company needed to raise money or be acquired," according to Bloomberg.

  • 1431 EST: Bloomberg reports that "Musk returned to the stand after a lunch break to questions about SolarCity’s efforts to raise funds to offset a cash crunch in 2015. He said he disagreed that there was “significant evidence” the company was “seriously struggling” with its cash management at the time and downplayed the impact of fluctuations in the company’s cash on its business, saying that is common for high-growth industries -- noting Amazon had negative cash flow “for many years.”"

  • 1422 EST: Baron has reportedly put up a slide that shows he's "determined to use to trip Musk up," Bloomberg says. The slide reportedly "shows SolarCity’s sharp underperformance, again to suggest that Musk sold the solar company to Tesla’s board and investors as a natural fit for Tesla when in fact it was a basket case."

  • 1332 EST: Bloomberg is writing about Musk’s testimony like a UFC match, saying it has “devolved into a mano-a-mano contest between Musk and the investors’ lawyer, Randy Baron.” As far as the merits of the case, “Musk is giving no quarter on the issue of whether he steamrolled the board into approving the SolarCity deal or is the dominant force in Tesla,” BBG writes, stating Musk placed blame for SCTY’s performance on “fallout from the Covid-19 pandemic and not fundamental flaws within the company.”

  • 1230 EST: Bloomberg reports that questioning between Baron and Musk got “very testy” after Baron asked Musk if he “rage fired” people or treated them with derision. Musk denied “rage firing” anyone, but said he gives “clear and frank feedback which may be construed as derision.” Baron then played several clips of Musk’s deposition highlighting acrimonious exchanges between the two, BBG reported.

  • 1158 EST: Musk says on being a CEO: "I don’t want to be a CEO, I tried hard not to be the CEO at Tesla, but I had to or it would die. I rather hate being a boss. I’m an engineer,” per BBG.

  • 1142 EST: Elon Musk says he "doesn't want to be CEO" and "hates being a boss", according to TOPLive, per BBG. “To be honest, I don’t want to be the boss of anything,” BBG reports him as saying.

  • 1141 EST: The judge has had to warn Musk to "listen to Baron’s questions closely and answer them directly without wandering in his responses," per BBG.

  • 1100 EST: As of the "first break of the morning", Delaware reporter Isabel Hughes writes that "Musk has spent a lot of time arguing the pandemic is to blame for poor solar performance" and that Musk has told the plaintiff's attorney that his questions are "tricky and deceptive". "Musk has thus far taken the opportunity to elaborate on every yes-or-no question. Also has told [plaintiff's attorney] Baron several times he’s just wrong," Hughes writes.

  • 1052 EST: Jef Feeley, legal reporter, writes that "Musk is getting more combative under questioning from Baron," per BBG.

  • 1039 EST: Peter Jeffrey, legal editor, writes that Musk has now interrupted once or twice to push back, and Baron has warned him it’s going to go really slow if he keeps that up. “Some of your questions are tricky and deceptive,” Musk tells the lawyer, with whom he tangled in his 2019 deposition, to explain why he feels the need to clarify, per BBG.

  • 1030 EST: "Plaintiffs' attorney Randy Baron started his questioning of Musk by playing clips of Musk saying in prior depositions that the lawsuit was "wasting everyone's time," and that the next few quarters would vindicate the SolarCity deal. The next few quarters, we now know, did not." WaPo's Will Oremus writes on Twitter. 

  • 1019 EST: Plaintiff lawyer Randy Baron gives Musk “fair warning” that “we have a long way to go,” probably all day today and into tomorrow, BBG writes. 

  • 0900 EST: Delaware reporter Isabel Hughes shows up to court and says one spectator in the gallery showed up to the trial because “how often do you get to see Elon lie?”

*  *  *

Social media is also enjoying the show - and some "inconsistencies" are starting to show up:

--

Today is that day that Elon Musk is testifying in Wilmington, DE about Tesla's bailout buyout of Solar City. Musk's goal through testifying will be to try and show a judge that he does not control the company, which would absolve him accusations that he was unilaterally pulling the strings when Tesla bought the solar company, usurping the board and normal corporate governance.

Hanging in the balance is the question of whether or not Tesla was damaged as a result of the merger and, if so, if Elon Musk was the responsible party. As the Wall Street Journal noted today:

"If Vice Chancellor Joseph Slights III, the presiding judge, finds Mr. Musk didn’t control the deal, the case is likely over for the plaintiffs, Mr. Hamermesh said. Case law in Delaware generally defers to the business judgment of independent and properly motivated directors. On the other hand, if the evidence points to control, the court would assess whether the deal process and price were fair and, if not, whether Mr. Musk should be ordered to pay money back to Tesla, Mr. Hamermesh said."

    Musk is the first witness in the trial, which comes after shareholders have accused him of carelessly using shareholder funds to bailout his cousin, who was CEO of Solar City at the time.

    Tesla has argued that the company's shareholders "overwhelmingly voted" to approve the bailout, according to FT. Ann Lipton, law professor at Tulane University in New Orleans told FT: “The case has the potential to provide more guidance not only to courts, but also to deal planners, as to the factors courts are likely to take into account when determining whether someone is a controller.”

    Delaware Court of Chancery vice-chancellor Joseph Slights wrote in 2018 that “it is reasonably conceivable that Musk, as a controlling stockholder, controlled the Tesla board in connection with the acquisition” and that “there were practically no steps taken to separate Musk from the board’s consideration of the acquisition”.


     

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