MASSIVE $13 BILLION Dollar Lawsuit | Elon Musk & Tesla

everyone meet kevin here so there's a

lot of crazy stuff going on with tesla

we're going to talk about three lawsuits

one of which is actually great for elon

musk and two of which are not so great

for elon musk and we're going to talk

about this crazy rumored 20 for one

stock split for tesla that's right in

case you have not yet heard take a look

at this folks this is a notification of

corporate action for security held in

your jpmorgan account numerous people

have indicated that they have received

this document this is i have not

received this document i do hold tesla

shares at jpm who knows maybe it's in my

mail but i have not seen it yet anyway

individuals multiple individuals are

suggesting that they have gotten the

same letter saying that the preliminary

terms of the tesla stock split are a 20

for one stock split that would be really

incredible because at a roughly now nine

hundred dollars per share 20 or a 20

split would not increase the market

value of tesla we know that we know how

stock splits work but it would basically

mean tesla shares would be selling for

45 a share which is basically what tdoc

is selling for oh wait they're selling

for less now anyway

that's pretty wild it definitely make

options a lot more desirable for tesla

and could certainly make it easier for

individuals to buy in on tesla stock

especially since right now if you're

trying to save up that one share it

takes a little bit of time to get to

that 900 bucks of course fractional

trading is available on a lot of

platforms but not on every platform okay

great so now let's quickly talk about

the three lawsuits so i've read these

and i want to start with uh the good

news okay then then we're going to start

we're kind of going to like move over to

the worst news uh so the good news has

to do with the solar city acquisition

take a look at some of the salient items

here in 2006 elon musk said that he

wanted to accelerate the world to

basically sustainable energy and 10

years later as part of this propoded

master plan he ended up acquiring solar

city however several tesla shareholders

have alleged that this was a breach of

fiduciary responsibility because the

company had liquidity issues solar city

had liquidity issues financing issues

there were risks and this was all

discussed over an 11-day trial there

were risks that the company was going to

essentially uh get margin called on

their revolver credit lines uh and uh

and the allegation is that tesla was

used to bail out an insolvent solar city

uh to help out either people that elon

knew because he was highly involved in

the negotiations or was related to

because kimball musk was on the board of

solar city who's his brother so a lot of

speculation about this deal

and uh the judge did a rule on this uh

deal uh and uh of course what here's the

conclusion of this and then i'll get

into a couple of the fun quotes that

they mentioned but listen to this the

process employed by the tesla board to

negotiate and ultimately recommend the

acquisition for solar city was quote far

from perfect elon was more involved in

the process than a conflicted fiduciary

should have been in other words

fiduciary has the best interests of

shareholders in mind not themselves in

mind right and so elon should have acted

as fiduciary for shareholders for tesla

although some could argue that maybe he

has but anyway that conflicts obviously

were not completely neutralized with

that said quote the tesla board

meaningfully vetted the acquisition and

elon did not stand in its way of vetting

the acquisition equally if not more

important the preponderance of the

evidence reveals that tesla paid a fair

price for solar city that solar city was

at minimum worth what tesla paid for it

and the acquisition was highly

beneficial to tesla indeed the

acquisition marked a vital step forward

for the company that it has been making

for years to the market this claim to

the market that they want to be not just

a car manufacturer but also an

alternative energy company therefore the

courts the courts of verdict is for that

of the defense the defense here is elon

musk that's because the board members of

tesla who were also sued uh had

previously settled this lawsuit for 60

million dollars but elon musk kept

fighting because he was getting sued for

13 billion

of course in which case if he lost it

would have been a substantial uh issue

right i mean 13 billion dollars would be

liquidating a lot more tesla's here so

really good news here some of the

arguments that and i read the entire

thing here some of the interesting

points that the judge made is that hey

look elon musk talked in his master plan

about wanting power walls and how uh

when the tesla board toured the first

gigafactory that elon had created they

they discussed even before the solar

city deal the idea of acquiring a solar

company so that way they could sell both

power walls power packs and solar

products

and that elon believed that acquiring a

solar company was the best way forward

for doing such a thing

one of the problems though was that the

vast majority of solar city's customers

didn't have the financing in place to

buy these systems so they would take out

loans from solar city which led to major

liquidity crises for solar city because

think about it you know they're putting

on twenty five thousand dollar systems

that might cost them eighteen thousand

dollars to put up and if the uh

homeowners are financing most of it

doing zero down cash flow could be an

issue at solarcity and these were things

that were evaluated however listen to

this with respect to solar installations

solarcity exceeded its closest

competitors vivint and sunrun combined

and with respect to costs as solar

city's costs were actually 30 less uh

than its competitors and then they had

200 i'm sorry 2.2 billion dollars in

retained net present value which was

pretty uh pretty incredible and these

are very important stats

for building the case that the sole

solar city acquisition was fair in fact

solar city was acquired by tesla

for 2.6 billion dollars here you have a

note that as of q2 2016 solar city had

accumulated what is estimated to be 2.2

billion in net present value and

retained value using a six percent

discount rate and assuming contract

renewals right so very interesting that

uh you really see the judge get into the

cash flow numbers here what are the

values of the contracts the solar

contracts that they have uh and uh you

know rumors started flying around about

the solar city uh

acquisition and there were lots of phone

calls between board members and elon

elon like what you didn't know about

these concerning significant liquidity

issues and and the boards expressing

concerns about due diligence all of this

stuff is actually really important

because it goes to show that the tesla

board was really aware of what was

happening and so they decided hey you

know what let's lower our offer for

solarcity because like these these

like liabilities these issues are bad

and so let's offer solarcity less money

below what we were originally expecting

to offer and then solar city ended up

accepting that and so this negotiations

almost certainly helped in the judge's

opinion that hey like you guys found out

about all the problems and then you ask

for a price reduction like how is that

not doing the best thing for

shareholders now uh they also put the

solar city acquisition up to a

shareholder vote which caused a lot of

controversy so much so that elon decided

we need to like sell solar city like

sell the idea of the acquisition right

and so he's like hey let's do a joint

product demo of solarcity's product and

development the solar roof obviously

tesla's famous now for its solar roof

and that was a solar city product that

tesla ended up acquiring through

solarcity

really really cool to think about that

we think of the solar roof as a tesla

innovation no it was solar city and a

kimball musk uh you know in part product

uh you know a lot of talk online about

this being a low premium deal which is

good uh others say no it's a bailout

plan a lot of this this sort of back and

forth negotiation but ultimately what's

really fascinating here uh is despite

the fact that uh tesla ended up in dire

straits later with the model 3 issues

which ended up leading to some share

price pressure and these sorts of

lawsuits here's that 60 million

settlement uh the judge ended up ruling

in favor of uh elon musk and uh that uh

and one of the big reasons they saw was

the synergies that this sort of deal

would create for tesla specifically

sales and marketing efficiencies hey you

come to us and buy a car how about we

sell you solar hey how about we sell you

a uh power wall and that there's

substantial value to cross selling here

you have in test 2020 tesla reported an

increase in cross-selling within the

energy business as more than 40 percent

of our residential solar customers opt

for at least one power wall which are

very very high products and excuse me

the judge ends this with whether the

acquisition played a large or small part

and tesla's impressive growth is not

clear but there can be no doubt that the

combination with solarcity has allowed

tesla to become what it has for years

told the market and shareholders it

strives to be an agent of change that

will accelerate the world's transition

to both sustainable energy by helping

expedite the move from mine and burn

hydrocarbon economy towards a solar

electric economy crazy amazing lawsuit

let's now folks get on to the next one

that didn't turn out as well for elon

musk but it's not as costly as 13

billion dollars that elon just avoided

let's go now these next two cases are

pretty wild and they're not that great

for elon or tesla but before we hit

those you can get up to a thousand

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a slice of a stock worth all the way up

to a thousand dollars so go check it out

and start investing now now the next two

lawsuits are amazing and they have to do

with a lot of drama that comes out from

elon musk the first has to do with elon

musk in the whole funding secured

scandal of 2018. so here's what happened

in 2018 the short and skinny is elon

musk said hey considering taking tesla

private at 420 per share a significant

premium over the low 300 per share tesla

was trading for at the time which

immediately led tesla share price to

move up substantially

this was very interesting though because

tesla's board and a lot of tesla

executives claimed in interviews and

depositions later that they didn't know

that elon had sent this tweet which led

the security and exchange commission to

say hey

we'll settle with elon but the only way

we'll agree to settle with elon rather

than saying he's you know manipulating

the stock even though funding didn't

appear to be secured elon disputes this

elon says funding was secured that's in

court as to whether or not funding was

secured or not tbd but

the sec said hey look you know what

we'll settle

and elon says you need that that banks

were telling him if you want a line of

credit with our bank you need to settle

with the sec like we don't want to be

involved with giving you financing while

you're in this sort of legal battle with

the sec so anyway uh

elon musk agrees

to have

his tweets reviewed before tweeting so

now every time elon musk sends a tweet

he has to get approval from somebody

else at tesla and so elon musk has filed

a lawsuit to suggest that it's not fair

that he should have to have his tweets

reviewed that this is a suppression of

his free speech uh well and this is

called a motion to terminate a consent

decree here is that particular lawsuit

the rule permits a party to relieve them

from a final judgment like a decree with

the sec if

the

applying decree is no longer equitable

but it doesn't allow a party of a decree

to say it's no longer convenient for us

to follow the decree so an example of

this might be

let's say that you sign a paper saying

that when you walk to work every day you

will walk over the grass and not on the

sidewalk of somebody's property but now

and i know that sounds like a weird

thing to agree to but let's say that was

a settlement you agreed to okay whatever

like you can agree to weird stuff but

you agree to it but now you break your

legs and you're in a wheelchair it's

like i can't get my wheelchair over the

grass now it would be significant burden

and it's no longer the same punishment

for you to have to walk in the grass as

it is for you to have to wheel your

wheelchair over the grass so instead you

would

request a modification of that degree to

reasonableness so that the burden is

still the same and there has to be some

sort of significant change in

circumstance to warrant this something

that occurs out of unforeseen

circumstances uh and so this is what the

judge argues here and then musk or makes

the argument in this lawsuit that uh

elon musk having to get his tweets

approved is actually an intrusion of his

first amendment right to be free of

prior restraints that the first

amendment right is not to be infringed

upon under any circumstance

and that the sec has misused their

opportunity to make sure that elon

musk's tweets are approved to launch

endless and boundless investigations of

his free speech and that this is now

causing economic or that rather when he

made the agreement he was under economic

duress because banks were threatening to

withhold lines of credit if he didn't

agree to the settlement with the sec

and uh therefore he was forced into this

agreement so he's basically making the

argument that hey free speech uh

this is leading to harassment by the sec

and when i made the agreement i was

under duress which isn't fair

uh and so

the judge here responds and says that

none of the arguments that elon musk

makes

hold any water the judge is not

convinced

the judge even says that musk concedes

that his free speech rights do not

permit him to engage in speech that

could be quote considered fraudulent or

otherwise violate the law yet he made an

agreement that when he tweets he gets

prior approval now this might not be

convenient for elon musk but it is an

agreement that he entered into and the

judge here believes that

it's not fair for elon to be able to go

to court and just say hey i've agreed to

give up a right i've agreed to waive a

right as part of a settlement but now

because it's no longer convenient i want

to change that agreement we had the

judge rules that first of all that's not

fair

second the sec considers his argument

that the sec or musk's argument that the

sec is harassing him the judge considers

this meritless and particularly ironic

they say the judge says that you knew

what you were getting into when you

signed the agreement how could you call

it harassment when you agreed to have

somebody check your tweets

and the judge goes on to say that hey

elon musk you're saying that this has

opened up to a sheer number of demands

from the sec but the fact of the matter

is according to this judge that no no no

this has only led to three inquiries one

inquiries related to the original

enforcement action number two inquiries

related to the investigation that led to

the amended final judgments so basically

this has to do with like hey we just

want to make sure you're following the

the agreement we uh you know made and

any kind of changes that we're making in

agreements that we have towards the

final agreement right so like we have an

agreement changes have been made these

are things that are being requested on

now my guess is that elon's annoyed

because like any kind of original

enforcement action could be like a

peppering of like hey prove that your

last 50 tweets you sent were uh uh you

know approved by somebody else and it's

like ah this is like annoying this is

like harassment right uh and uh and then

of course the third inquiry here is when

elon musk ran a poll asking if he should

sell 10 of his tesla shares something uh

the judge here says would obviously

create some form of question from the

sec and so the judge actually says hey

wait a minute like

first of all you gave up your free

speech you agreed to it number two the

stuff they're bothering you about is

stuff you agreed to that makes this

ironic and meritless and third your

claim that you un you know went through

economic duress is quote wholly

unpersuasive

uh in that tesla was in no position to

fight the sec but the judge here says

look it's a fact that any time you're in

a lawsuit whether it's with the sec or

not it's going to cause distraction of

management lead to litigation costs and

ultimately be considered an undesirable

event

so this is why they say here no single

sec attorney can authorize a lawsuit and

it requires commission approval so this

right here slam on elon musk elon musk

gets beat up and therefore says that

the economic distress claim the free

speech claim and all of the other claims

are basically dismissed it says right

here the motion to quash the subpoena

and terminate the consent decree is

denied signed today april 27 2022 now

unfortunately this goes on because

remember this all started because of the

whole funding secured scandal right so

i'm going to give you the short and

skinny on the funding secured one and

it's all right here this is the page you

got to pay attention to page 39 of the

lawsuit take a look at this on august 17

2018 a new york times article contained

new information about the statement that

elon musk made on august 7th and it

quote revealed that number one elon musk

posted the tweet funding secured while

driving himself to the airport number

two he had been under a lot of work

related stress and the private

investment fund of saudi arabia who was

in talks to maybe fund the deal to take

tesla private

did not commit any cash and this was in

a new york times article uh revealing uh

information uh about statements that

elon musk had made on behalf of tesla so

this was an interview with the new york

times and elon musk a lot of people

don't like the new york times but that's

what the judge is referring to here

and that the judge finds that funding

was far from secure and that people were

concerned about elon musk's drug use at

the time maybe because of uh uh you know

smoking marijuana on uh the joe rogan

podcast apparently there was an

hour-long interview with the new york

times and that new york times article in

my opinion based on reading all of this

is is really the big bombshell that

changes a lot of this lawsuit in terms

of the backstory of what happened here

and it really gives a little bit more

clarity in elon musk's alleged based on

what the new york times is saying own

words that funding was not secured and

therefore the judge ultimately decides

that so far in this lawsuit about

funding being secured the funding

secured claims are probably in the

direction of misleading potentially even

false

so

not good so we got one good news and two

bad news here one good news solarcity

clear 13 billion liability for elon musk

avoid it

elon's tweets still got to get reviewed

and sorry elon the judge is not buying

your argument that funding was secured

even though elon still to this day can

attest that funding was indeed secured

so the saga continues thanks so much for

watching and make sure to check out

public via the link down below thanks

bye