Tesla investors fight Musk

Several Tesla shareholders–including Cleveland Bakers and Teamsters Pension Fund, along with individuals on behalf of Tesla, Daniel Hazen, and Michael Giampietro–have filed a lawsuit against Tesla CEO, Elon Musk, and the board of directors for Musk’s decision to launch a rival AI start-up company, xAI, and directing resources and talent from Tesla to xAI.  

Why is Musk being sued?

Tesla shareholders are accusing Musk and Tesla board members of breaching their “fiduciary duty” to Tesla shareholders by launching xAI. They claim that Musk has always positioned Tesla as a robotics and AI company, rather than an automaker, which although has boosted share prices, puts it in direct competition with his AI start-up, xAI.

Not only that, but the lawsuit also states that Musk is “diverting scarce talent and resources from Tesla to xAI” (over 11 Tesla employees have jumped ship to xAI since it launched last year and Musk diverted a massive shipment of NVIDIA AI chips, originally meant for Tesla, to xAI only last week) and has given xAI access to Tesla AI-related data.

“The notion that the CEO of a major, publicly traded Delaware corporation could — with the evident approval of his board — start a competing company, and then divert talent and resources from his corporation to the startup, is preposterous”

The angry shareholders even used an analogy to prove their case: It would be like letting the CEO of Coca-Cola start a rival soft drink company and take staff and ingredients for Coca-Cola production, for the new company.

This comes after Musk recently threatened to build AI products outside of Tesla, if he wasn’t given more voting control, and comes hours before Tesla’s annual meeting where shareholders were expected to decide whether to integrate Tesla in Texas, rather than Delaware, where it currently resides, because a judge had blocked Musk’s request for a $56B compensation package.