Tesla shareholders filed a lawsuit against CEO Elon Musk and other executives on June 13, alleging that they enriched xAI at the expense of the auto company.
The lawsuit claimed that xAI, an artificial intelligence company founded by Musk in 2023, has poached Tesla employees, diverted over $500 million in GPUs from Tesla to X, and used Tesla’s data for xAI development without compensating the company.
Additionally, the plaintiffs referred to a tweet where Musk threatened to move AI efforts away from Tesla unless he received 25% voting control in the company, stating:
“Musk publicly threatened that he would divert corporate opportunities away from Tesla unless Tesla gave him substantial additional equity.”
The case revolves around Musk’s characterization of Tesla as an AI firm, with implications that xAI’s growth has detrimentally impacted the company.
According to the lawsuit, Musk’s actions have generated significant value for xAI at Tesla’s expense.
Numerous Remedies Sought
The plaintiffs have accused Musk and other Tesla board members of breaching their fiduciary duties. They argue that the board members are unable to impartially consider a demand against Musk.
Furthermore, the lawsuit accuses Musk of unjust enrichment due to the movement of staff and resources between the two companies.
“It would be unconscionable to permit Musk to retain the improper benefits.”
The plaintiffs have requested damages for the staff and resource diversion, disgorgement of Musk’s equity stake in Tesla, and the establishment of a constructive trust over Musk’s interest in xAI, among other remedies.
