Tesla CEO Elon Musk is expected in court on Monday, and the stakes are high — if he loses he could have to pay upwards of $2 billion from his considerable personal wealth.
Musk will be the first witness in a trial to defend his role in Tesla’s $2.6 billion acquisition of SolarCity. Shareholders have sued Musk and members of the Tesla board, alleging that the 2016 deal amounted to a SolarCity bailout.
They also allege that it unfairly enriched the Musk family, who were among the largest shareholders, and that Musk and others failed to disclose all pertinent details and breached their fiduciary responsibilities. Musk has insisted he was “fully recused” from negotiations over the deal.
Last year, the board members named in the suit settled with the Tesla shareholders for $60 million with no admission of wrongdoing. Musk, the second-richest person in the world, was the only defendant who chose to take the fight to court.
There’s no jury to persuade in this matter. His fate will be determined by the Delaware Chancery Court’s judge, Vice-Chancellor Joseph Slights III.
Days in court
Musk has had his share of legal problems beyond SolarCity.
For example, the SEC sued him in 2018 for fraud, with Musk and Tesla settling, paying $20 million each. The charges came after Musk tweeted about taking Tesla private for $420 a share, a move that sent Tesla’s stock price soaring. Musk had to temporarily relinquish his chairman role at Tesla as one of the terms of the settlement.
In a separate case, he emerged victorious after caving expert Vernon Unsworth said Musk had defamed him when the Tesla CEO called him a “pedo guy” on twitter. His attorneys argued that “pedo guy” was heated rhetoric and not meant as statement of fact.
Tesla and Musk are facing many other lawsuits, including one over Musk’s unprecedented CEO compensation package, and a number of federal probes according to the company’s own financial filings.
In the SolarCity case, the judge will have to decide whether Musk was a conflicted controlling shareholder who met the “entire fairness” standard in his handling of the SolarCity acquisition.
In other words, was Musk acting in Tesla shareholders’ best interest? And did Musk tell shareholders everything they deserved to know?
Known as a shareholder derivative action, this kind of lawsuit is filed by investors on behalf of a corporation, rather than the individuals or funds themselves. If the plaintiffs win, proceeds may go to Tesla and not to the stakeholders who brought the suit.
According to a filing with the chancery court, Musk owned 22.1% of Tesla common stock at the time of the deal, and 21.9% of SolarCity. SolarCity was a troubled asset that was bleeding cash in the capital-intensive market of residential solar deployment.
Musk’s attorneys are expected to argue that the SolarCity deal hasn’t harmed shareholders at all and that they voted overwhelmingly to approve the acquisition. After all, Tesla shares have skyrocketed from a closing price of $43.92 on June 21, 2016 — when Tesla announced it would bid for SolarCity — to a closing price of $656.95 on July 9, 2021 (Friday) after a five-for-one stock split last year.
The company is also part of the S&P 500 now, and reports profits regularly.
SolarCity was founded and run by Musk’s cousins, Lyndon and Peter Rive, but backed by Musk who served as chairman of the board. Meanwhile, he also was CEO of Tesla, as well as the company’s chairman.
That wasn’t his only potential conflict. SpaceX, Musk’s aerospace venture, had invested $255 million in SolarCity bonds from March 2015 to March 2016. Four members of Tesla’s board directly or indirectly owned SolarCity stock at the time the acquisition was under consideration. And some Tesla board members also held shares in SpaceX and were on its board.
How he pitched it
To Musk and many of his supporters, the acquisition of SolarCity in 2016 represented a natural combination of his companies and a way for Tesla to pursue its environmental mission with a broader array of products. Homeowners would be able to finance and install solar rooftop panels from the same company that provided their electric vehicle, home charging station and backup battery for energy storage.
Tesla had already launched an energy division in late 2015, with a home battery dubbed the Powerwall and other big batteries for use by businesses and utilities.
By June 2016, Musk said Tesla would bid $2.8 billion to buy SolarCity. “I don’t think this creates additional financial risk for Tesla,” he said at that time, and called a merger “blindingly obvious.” But Tesla investors were skeptical, with the stock price plunging more than 10% on the announcement.
In July 2016, Musk presented his vision of Tesla as an automotive innovator and renewable energy titan in his famous “Master Plan Part Deux.”
As CNBC previously reported, unsealed court documents, including emails between Musk and SolarCity execs, would later reveal that he knew SolarCity was facing a “liquidity crisis” even as Tesla pursued the acquisition.
“Three things need to happen to change investor sentiment: SolarCity solving its liquidity crisis, an LOI with Panasonic to address solar cell production risk, and a joint product demo,” Musk wrote to SolarCity execs in September that year. “Should be able to do all those before the shareholder vote.”
In October 2018, Tesla and SolarCity jointly announced a combined solar roof and battery pack. Musk showed off what looked like a solar panel, miniaturized and sleek enough to be mistaken for high-end roofing materials, at the Hollywood set of Desperate Housewives.
After the deal
The hype event did help him to turn investor sentiment. In November, the deal was approved in a vote by 85% of shareholders. But after it closed, Tesla’s SolarCity business would falter.
Through the years, the company repeatedly delayed mass manufacturing its Solarglass roof tiles. The ones Musk presented as a production-ready prototype in 2016 were actually a non-functional design prototype.
Walmart sued Tesla after fires broke out on panels the company had installed atop their facilities. A former Tesla Energy employee filed a whistleblower complaint to federal agencies about the fire risks of Tesla’s solar rooftops. And Panasonic exited from the Buffalo plant that Tesla took over, once it was clear Tesla was not going to manufacture its solar roof tiles there.
While the Tesla solar roof tiles have not taken off, the company’s energy storage products are on a tear, as demand for lower-cost electricity from renewable sources picks up worldwide.
In the trial starting Monday in Wilmington, Delaware, Musk will be represented by attorneys with Ross Aronstam & Moritz (David E. Ross, Garrett B. Moritz and Benjamin Z. Grossberg). The trial is expected to run until July 23, 2021, unless the entities seek a settlement before it’s done.
Nvidia briefly surpasses $2 trillion in market cap during intraday trading
Nvidia CEO Jensen Huang speaks onstage during The New York Times Dealbook Summit 2023 at Jazz at Lincoln Center in New York City on Nov. 29, 2023.
Slaven Vlasic | Getty Images
After rising earlier in the day, shares of Nvidia were down about 1% at 11 a.m. ET. Nvidia stock closed up 16% Thursday.
Nvidia posted $22.10 billion in revenue for its fiscal fourth quarter, a 265% increase from a year ago and above the $20.62 billion expected by analysts polled by LSEG, formerly known as Refinitiv. Nvidia reported $12.29 billion in net income during the quarter, up a staggering 769% from $1.41 billion last year.
The company has benefited from the tech sector’s insatiable demand for artificial intelligence capabilities over the past year. Nvidia makes the pricey graphics processors for the servers that power large AI models.
Nvidia said it expects $24.0 billion in sales in the current quarter, surpassing the $22.17 billion expected by analysts.
“Fundamentally, the conditions are excellent for continued growth,” Nvidia CEO Jensen Huang said during the company’s quarterly call with investors Wednesday.
— CNBC’s Kif Leswing contributed to this report.
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AI can ‘disproportionately’ help defend against cybersecurity threats, Google CEO Sundar Pichai says
Google CEO Sundar Pichai speaks in conversation with Emily Chang during the APEC CEO Summit at Moscone West on November 16, 2023 in San Francisco, California. The APEC summit is being held in San Francisco and runs through November 17.
Justin Sullivan | Getty Images News | Getty Images
Munich, GERMANY — Rapid developments in artificial intelligence could help strengthen defenses against security threats in cyber space, according to Google CEO Sundar Pichai.
Amid growing concerns about the potentially nefarious uses of AI, Pichai said that the intelligence tools could help governments and companies speed up the detection of — and response to — threats from hostile actors.
“We are right to be worried about the impact on cybersecurity. But AI, I think actually, counterintuitively, strengthens our defense on cybersecurity,” Pichai told delegates at Munich Security Conference at the end of last week.
Cybersecurity attacks have been growing in volume and sophistication as malicious actors increasingly use them as a way to exert power and extort money.
Cyberattacks cost the global economy an estimated $8 trillion in 2023 — a sum that is set to rise to $10.5 trillion by 2025, according to cyber research firm Cybersecurity Ventures.
A January report from Britain’s National Cyber Security Centre — part of GCHQ, the country’s intelligence agency — said that AI would only increase those threats, lowering the barriers to entry for cyber hackers and enabling more malicious cyber activity, including ransomware attacks.
“AI disproportionately helps the people defending because you’re getting a tool which can impact it at scale.
CEO at Google
However, Pichai said that AI was also lowering the time needed for defenders to detect attacks and react against them. He said this would reduce what’s known as a the defenders’ dilemma, whereby cyberhackers have to be successful just once to a system whereas a defender has to be successful every time in order to protect it.
“AI disproportionately helps the people defending because you’re getting a tool which can impact it at scale versus the people who are trying to exploit,” he said.
“So, in some ways, we are winning the race,” he added.
Google last week announced a new initiative offering AI tools and infrastructure investments designed to boost online security. A free, open-source tool dubbed Magika aims to help users detect malware — malicious software — the company said in a statement, while a white paper proposes measures and research and creates guardrails around AI.
Pichai said the tools were already being put to use in the company’s products, such as Google Chrome and Gmail, as well as its internal systems.
“AI is at a definitive crossroads — one where policymakers, security professionals and civil society have the chance to finally tilt the cybersecurity balance from attackers to cyber defenders.
The release coincided with the signing of a pact by major companies at MSC to take “reasonable precautions” to prevent AI tools from being used to disrupt democratic votes in 2024’s bumper election year and beyond.
Adobe, Amazon, Google, IBM, Meta, Microsoft, OpenAI, TikTok and X, formerly Twitter, were among the signatories to the new agreement, which includes a framework for how companies must respond to AI-generated “deepfakes” designed to deceive voters.
It comes as the internet becomes an increasingly important sphere of influence for both individuals and state-backed malicious actors.
Former U.S. Secretary of State Hillary Clinton on Saturday described cyberspace as “a new battlefield.”
“The technology arms race has just gone up another notch with generative AI,” she said in Munich.
“If you can run a little bit faster than your adversary, you’re going to do better. That’s what AI is really giving us defensively.
president of security at DXC
A report published last week by Microsoft found that state-backed hackers from Russia, China, and Iran have been using its OpenAI large language model (LLM) to enhance their efforts to trick targets.
Russian military intelligence, Iran’s Revolutionary Guard, and the Chinese and North Korean governments were all said to have relied on the tools.
Mark Hughes, president of security at IT services and consulting firm DXC, told CNBC that bad actors were increasingly relying on a ChatGPT-inspired hacking tool called WormGPT to conduct tasks like reverse engineering code.
However, he said that he was also seeing “significant gains” from similar tools which help engineers to detect and reserve engineer attacks at speed.
“It gives us the ability to speed up,” Hughes said last week. “Most of the time in cyber, what you have is the time that the attackers have in advantage against you. That’s often the case in any conflict situation.
“If you can run a little bit faster than your adversary, you’re going to do better. That’s what AI is really giving us defensively at the moment,” he added.
Ride-hailing giant Grab posts first profitable quarter, announces $500 million share buyback
A attendee walks past a banner with a Grab logo before a bell-ringing ceremony as Grab begins trading on the Nasdaq, in Singapore, on Thursday, Dec. 2, 2021.
Ore Huiying | Bloomberg | Getty Images
This compares with a $391 million loss recorded in the same period a year ago. The boost was “primarily due to the improvement in Group adjusted EBITDA, fair value changes in investments, and lowered share-based compensation expenses,” the company said.
Revenue for the quarter hit $653 million, exceeding LSEG analysts’ estimates of $634.86 million.
Losses for full year 2023 came to $485 million, down 72% from $1.74 billion a year ago.
In addition to ride-hailing, the company also provides financial services like payments and insurance, as well as deliveries for food, groceries and packages.
“We exited [2023 with] mobility exceeding pre-Covid levels. We are seeing a very strong demand in the mobility space,” Grab CFO Peter Oey told CNBC in an exclusive interview on Friday, adding that tourism is “growing very much.”
“If you look at the deliveries business, we have another record 13% year-over-year growth. We have now more users on our platform also at the same time. So we have really strong momentum,” he said on CNBC’s “Squawk Box Asia.”
Grab announced Thursday it would be repurchasing up to $500 million worth of class A ordinary shares for the first time.
Grab was largely unprofitable during its years of operation, having amassed billions of dollars in losses since its inception in 2012.
In the initial years of business, tech startups tend to prioritize growth over profitability, which usually means burning a lot of cash. But with global macro uncertainties slowing growth, they have been forced to renew their focus on profitability and be more prudent with costs.
During the fourth quarter, total incentives — which include partner and consumer incentives — were further reduced to 7.3% of total value of goods sold, Grab said in its report. That’s compared to 8.2% in the same period a year ago “as we continued to improve the health of our marketplace.”
Grab had been doling out incentives to attract drivers and passengers to its platform but that’s tapering now as the company moves to drive up profitability.
On whether Grab would reach a time where it wouldn’t need to incentivize people to stay on the platform, Oey said incentives will “always be a lever” for the business.
“I don’t think we’re going to see a world where there’s no incentive whatsoever,” he told CNBC, adding that incentives help “to make sure we have enough supply” of drivers and attract price-sensitive customers.
For 2024, Grab expects revenue to come in between $2.70 billion and $2.75 billion, lower than LSEG analysts’ consensus of $2.8 billion.
Grab’s shares closed 8.41% lower on Thursday. Its share price has plummeted 75.8% from its $13.06 opening price in December 2021, when the firm first listed on the Nasdaq.
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