Tesla shareholders sue Musk for starting competing AI company
What specific allegations are made against Elon Musk and Tesla's board of directors in the lawsuit filed by Cleveland Bakers and Teamsters Pension Fund?
The lawsuit filed by Cleveland Bakers and Teamsters Pension Fund against Elon Musk and Tesla's board of directors makes several allegations. The plaintiffs claim that Musk breached fiduciary duties to shareholders and unjustly enriched himself by launching a competing AI company, xAI, and then diverting talent and resources from Tesla to the new startup1. They also allege that Musk violated Tesla's code of business ethics by creating and leading xAI, and that the board has allowed him to continue to violate this code unimpeded.
The plaintiffs argue that Musk's actions are akin to a hypothetical situation where the CEO of Coca-Cola starts a rival soft-drink company and sends ingredients to it. They point out that at least 11 employees have joined xAI directly from Tesla, and that Tesla has been providing xAI with access to its AI-related data. Additionally, the lawsuit highlights Musk's diversion of a significant shipment of AI processors from Nvidia, which had been reserved for Tesla, to his social media company X (formerly Twitter).
The plaintiffs are asking the court to force Musk to give up his stake in xAI and hand it over to Tesla, accusing the board of failing to protect the interests of Tesla and its shareholders in the face of Musk's disloyalty.
What are the plaintiffs requesting the court to do in relation to Musk's stake in xAI?
The plaintiffs are requesting the court to force Elon Musk to disgorge his stake in xAI and hand it over to Tesla. They allege that Musk and members of Tesla's board breached fiduciary duties to shareholders and unjustly enriched Musk by allowing him to launch a competing company, xAI, and then divert talent and resources from Tesla to the new startup3.
How does the lawsuit describe the impact of Musk's actions on Tesla's resources and talent?
The lawsuit alleges that Elon Musk's decision to start xAI and then divert talent and resources from Tesla to the new startup has had a significant impact on Tesla2. The plaintiffs claim that at least 11 employees have joined xAI directly from Tesla. They also point to reports that Tesla has been providing xAI access to its AI-related data. Furthermore, the lawsuit alleges that Musk diverted a sizable shipment of AI processors from Nvidia that had been reserved for Tesla to his social media company X. The plaintiffs argue that the board has allowed Musk to "plunder resources from Tesla and divert them to xAI", and that this has created billions in AI-related value at a company other than Tesla2.