A look back at the Musk-Tesla-SolarCity acquisition case – pv magazine International
In 2016, Tesla acquired solar panel installer and financier SolarCity for $2.6 billion and assumed $3 billion in debt.
Investors were skeptical of the deal from the start, and Tesla stock fell more than 10% on the June announcement. In 2016, SolarCity shares were already plunging and the company was experiencing layoffs.
One of the biggest problems with the deal was that Elon Musk was the largest shareholder in Tesla and SolarCity at the time of the acquisition. Additionally, Musk and his cousins, who served as CEOs and CTOs at SolarCity, founded the solar installer in 2006, while Musk was chairman of the company. Five other Tesla directors were direct or indirect owners of SolarCity shares.
To make matters worse, it has been alleged that Musk was aware of SolarCity’s financial troubles at the time of the deal – so it was more of a bailout than an acquisition.
Some have argued that Musk managed to get the SolarCity purchase approved by Tesla’s board of directors by misrepresenting the company’s financial health, saying cash flow would be positive within six months of the purchase. . Many believe the massive deal was not properly vetted and that SolarCity’s financial peril was hidden by a hasty analysis of the company’s finances by an outside firm.
Those who opposed Musk and this SolarCity takeover also believed the outspoken entrepreneur was trying to convince Tesla shareholders that the deal was good by promoting the unveiling of a SolarCity product that didn’t exist. again: glass solar tiles.
After the $2.6 billion deal was reached for Tesla to buy SolarCity, Tesla shareholders sued Tesla/SolarCity/Musk and sought $2.6 billion in damages – or the cost of acquiring SolarCity.
The shareholders argued that Musk “violated his fiduciary duties, squandered Tesla’s assets and unjustly enriched himself by pressuring to buy the money-losing solar company in which he was the largest investor,” according to Reuters.
Like photo magazine reported in March 2018, a Delaware judge denied a request by Musk and Tesla to dismiss the lawsuit. The dismissal was based on the argument that Musk was not the majority shareholder, since he did not own a majority of the shares of either company. Since that moment, a few things have happened in the Musk/Tesla/SolarCity fight.
In January of this year, each of Tesla’s directors except Elon Musk agreed to a $60 million settlement to resolve shareholder disputes regarding Tesla’s 2016 acquisition of SolarCity. This settlement covered the following five current Tesla directors: Robyn Denholm, Ira Ehrenpreis, Antonio Gracias, Stephen Jurveston and Kimbal Musk. An additional director, Brad Buss, is no longer on Tesla’s board of directors, but was at the time of the deal and was also part of the settlement.
That $60 million bill will be picked up by insurers covering Tesla’s directors and officers in a derivative settlement agreement. Neither Tesla nor the directors have commented on the partial settlement, but court filings have Tesla officials defending the acquisition of SolarCity by stating that “the process and price of this acquisition was inherently fair to Tesla shareholders.”
The glaring omission from the January settlement agreement was Musk, who fully intends to sue and defend himself and his company against the claims made against him and the purchase of SolarCity for 2 .6 billion.
This brings us to the latest update in this multi-pronged legal battle. Legal proceedings in the Delaware Court of Chancery regarding the Tesla purchase were all scheduled to begin on March 16. But, as the coronavirus pandemic has impacted everything from american finances to the college futurethe legal proceedings for the Tesla-Musk-SolarCity battle have been postponed to March 13.
The trial has been postponed indefinitely and a new date has not yet been set. The presiding judge in the Joseph Slights case offered the following statement:
“Please know that this was not an easy decision to make, given the time and resources you have devoted to preparing for this trial, and the last-minute nature of this decision. We expect more of 100 people are gathering around this trial. And while I certainly wouldn’t characterize this trial, or any other trial, as ‘non-essential’, it is not expedited and no irreparable harm will result from an adjournment.
Musk was to be the first witness at the trial to defend his decisions as CEO of Tesla.
When the trial finally begins, how outspoken and brash Musk handles his testimony and demeanor will likely be a key determinant of the outcome.
By Mike Brown
As Director of Communications at LoanEDU, Mike Brown uses data, usually from surveys and publicly available resources, to identify emerging trends in personal finance and tell unique stories. His work, which has been featured in outlets like the Wall Street Journal and the Washington Post, provides consumers with a personal finance measurement tool and can help them make informed financial decisions.
The views and opinions expressed in this article are those of the author and do not necessarily reflect those of photo magazine.