Tesla shareholders have filed a lawsuit against CEO Elon Musk and other executives, accusing them of prioritizing Musk’s AI company, xAI, over Tesla’s interests.
The Cleveland Bakers and Teamsters Pension Fund, along with Daniel Hazen and Michael Giampietro, reportedly lodged the stockholder complaint in Delaware’s Chancery Court at the company’s general annual meeting on Thursday, June 13, 2024.
They alleged that xAI, founded by Musk in 2023 to develop advanced AI technology, has unfairly benefited at Tesla’s expense. According to the lawsuit, xAI has hired Tesla employees, redirected at least $500 million in GPUs from Tesla to xAI, and used Tesla’s data for its development without compensating Tesla.
The plaintiffs cited an X post from Musk in which he threatened to divert AI efforts away from Tesla unless he was given 25% voting control in the company. In the post , Musk remarked:
“If I have 25%, it means I am influential but can be overridden if twice as many shareholders vote against me vs for me. At 15% or lower, the for/against ratio to override me makes a takeover by dubious interests too easy.”
The lawsuit argued that the rise of xAI has undermined Musk’s portrayal of Tesla as an AI-focused company. They pointed to Musk’s frequent description of Tesla as an
“AI/robotics company that appears to many to be a car company,”
suggesting that xAI’s emergence has negatively impacted Tesla.
The shareholders accused Musk of breaching his fiduciary duties to Tesla and alleged that other Tesla board members failed in their responsibilities by allowing these actions. They claim Musk has been unjustly enriched through the transfer of staff and resources between Tesla and xAI, arguing that it is unfair for him to retain these benefits.
The plaintiffs are seeking damages for Tesla related to the diverted resources and staff. They are asking the court to force Musk to relinquish his equity stake in Tesla and to impose a trust over his interest in xAI, among other remedies.
Musk has yet to respond to the lawsuit amidst the ongoing legal proceedings.
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