Tesla shareholders are taking legal action against CEO Elon Musk and the automaker’s board of directors.
The lawsuit, filed by the Cleveland Bakers and Teamsters Pension Fund, Daniel Hazen, and Michael Giampietro, claims Musk’s decision to launch xAI, a competing AI company, has diverted talent and resources from Tesla.
The shareholders argue that Musk’s actions breach fiduciary duties and violate Tesla’s code of business ethics. They allege that Musk has unjustly enriched himself by launching xAI and are demanding that he disgorge his stake in the new company and hand it over to Tesla.
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The timing of the lawsuit is particularly striking, as it was filed just hours before Tesla’s annual meeting, where shareholders are set to vote on Musk’s controversial $56 billion compensation package. The complaint highlights that at least 11 Tesla employees have joined xAI, and accuses Musk of diverting AI processors from Nvidia meant for Tesla to his social media company, X.
Musk’s defence hinges on the claim that Tesla’s new data centre in Texas wasn’t ready to store the Nvidia chips. However, the plaintiffs argue that the board has failed to protect Tesla’s interests and has allowed Musk to plunder resources for xAI.
This lawsuit is a significant challenge to Musk’s leadership and raises questions about the governance of Tesla. As the drama unfolds, all eyes will be on the Delaware Chancery Court to see how this high-stakes legal battle will play out. Buckle up, this is one rollercoaster you won’t want to miss!
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