Tesla Shareholders File Lawsuit Against CEO Elon Musk and Board of Directors

Tesla shareholders filed a lawsuit Thursday against CEO Elon Musk and the company’s board, alleging that Musk’s xAI startup is a “competitor” that is depriving the company of talent and resources. ‘artificial intelligence.

This comes the same day shareholders voted to reinstate Musk’s $44.9 billion pay package that a Delaware judge threw out in January.

The Cleveland Bakers & Teamsters Retirement Fund, Daniel Hazen and Michael Giampietro filed the shareholder complaint June 13 in Delaware Chancery Court on behalf of Tesla.

They claim Musk diverted “scarce talent and resources from Tesla to xAI” and raised billions for the startup while “promoting xAI’s access to Tesla’s AI-related data.”

The automaker has long touted its cars’ autonomous driving capabilities and driver-assistance features.

Musk’s xAI company has made “several key AI-focused Tesla hires,” including the “most significant” hire of Tesla’s computer vision team leader Ethan Knight in March 2024, the trio said.

Citing a CNBC report in early June, the lawsuit said Musk “personally began directing Nvidia” to send graphics processing units (GPUs) – the computing power underlying AI models – directed to Tesla for xAI and X.

At the time, Musk told Channel X that the GPUs were “going to sit in a warehouse” because Tesla “didn’t have anywhere to send them.”

“In all of this, Musk’s colleagues on the Tesla board have done nothing,” the shareholders said.

They added that the board “completely failed to attempt” to fulfill its fiduciary duty to Tesla and its shareholders “in the face of Musk’s blatant betrayal,” allowing him to “create billions of dollars of value tied to ‘AI at a company other than Tesla.’

The lawsuit demands the return of “value transferred from Tesla.”

Tesla Inc (TSLA) shares are down 26.5% this year. It closed June 13 up about 3% at $182.47 with a slight rise of 0.13% after hours, according to Google Finance.

Investors claim xAI was launched due to Musk’s lack of voting control at Tesla

The trio pointed out Musk’s Jan.

“If that’s not the case, I would prefer to build products outside of Tesla,” Musk added.

about: Elon Musk drops lawsuit against OpenAI CEO Sam Altman

Shareholders claimed that Musk’s comment indicated that he “intentionally founded xAI to create products outside of Tesla’s AI-related products that he had previously planned to create within Tesla.”

source: Elon Musk

At the time of publication, Musk owned about 21% of the company, but a Delaware court overturned Musk’s 2018 compensation plan in January, reducing his stake to 13%, according to the lawsuit.

As his voting power declined, “Musk responded by ramping up operations at XAI,” they claimed.

The June 13 shareholder vote to reinstate the 2018 wage plan still faces a potential months-long holdup in a Delaware court and the Supreme Court, as Tesla fights to overturn the earlier rejection.

Tesla did not immediately respond to a request for comment.

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