• Sun. Dec 5th, 2021

Tesla CEO Musk goes to trial Monday on $2.6 billion SolarCity deal


Jul 10, 2021

Elon Musk speaks at SolarCity’s Inside Power Summit in New York.

Rashid Umar Abbasi | Reuters

Tesla CEO Elon Musk is anticipated in court docket on Monday, and the stakes are excessive — if he loses he might must pay upwards of $2 billion from his appreciable private wealth.

Musk would be the first witness in a trial to defend his position in Tesla’s $2.6 billion acquisition of SolarCity. Shareholders have sued Musk and members of the Tesla board, alleging that the 2016 deal amounted to a SolarCity bailout.

In addition they allege that it unfairly enriched the Musk household, who have been among the many largest shareholders, and that Musk and others didn’t disclose all pertinent particulars and breached their fiduciary tasks. Musk has insisted he was “absolutely recused” from negotiations over the deal. 

Final yr, the board members named within the go well with settled with the Tesla shareholders for $60 million with no admission of wrongdoing. Musk, the second-richest particular person on the planet, was the one defendant who selected to take the struggle to court docket.

There isn’t any jury to steer on this matter. His destiny can be decided by the Delaware Chancery Courtroom’s decide, Vice-Chancellor Joseph Slights III.

Days in court docket

Musk has had his share of authorized issues past SolarCity.

For instance, the SEC sued him in 2018 for fraud, with Musk and Tesla settling, paying $20 million every. The costs got here after Musk tweeted about taking Tesla personal for $420 a share, a transfer that despatched Tesla’s inventory worth hovering. Musk needed to quickly relinquish his chairman position at Tesla as one of many phrases of the settlement.

Firm connections

Based on a submitting with the chancery court docket, Musk owned 22.1% of Tesla frequent inventory on the time of the deal, and 21.9% of SolarCity. SolarCity was a troubled asset that was bleeding money within the capital-intensive market of residential photo voltaic deployment.

Automobiles sit parked exterior the Tesla Inc. photo voltaic panel manufacturing unit in Buffalo, New York, U.S., on Wednesday, Dec. 26, 2018.

Andrew Harrer | Bloomberg | Getty Pictures

How he pitched it

To Musk and lots of of his supporters, the acquisition of SolarCity in 2016 represented a pure mixture of his corporations and a method for Tesla to pursue its environmental mission with a broader array of merchandise. Householders would be capable to finance and set up photo voltaic rooftop panels from the identical firm that offered their electrical car, residence charging station and backup battery for vitality storage.

Tesla had already launched an vitality division in late 2015, with a house battery dubbed the Powerwall and different massive batteries to be used by companies and utilities.

By June 2016, Musk stated Tesla would bid $2.8 billion to purchase SolarCity. “I do not suppose this creates extra monetary threat for Tesla,” he stated at the moment, and known as a merger “blindingly apparent.” However Tesla traders have been skeptical, with the inventory worth plunging greater than 10% on the announcement. 

In July 2016, Musk offered his imaginative and prescient of Tesla as an automotive innovator and renewable vitality titan in his well-known “Grasp Plan Half Deux.”

As CNBC beforehand reported, unsealed court docket paperwork, together with emails between Musk and SolarCity execs, would later reveal that he knew SolarCity was dealing with a “liquidity disaster” whilst Tesla pursued the acquisition.

“Three issues must occur to alter investor sentiment: SolarCity fixing its liquidity disaster, an LOI with Panasonic to handle photo voltaic cell manufacturing threat, and a joint product demo,” Musk wrote to SolarCity execs in September that yr. “Ought to be capable to do all these earlier than the shareholder vote.”

In October 2018, Tesla and SolarCity collectively introduced a mixed photo voltaic roof and battery pack. Musk confirmed off what seemed like a photo voltaic panel, miniaturized and glossy sufficient to be mistaken for high-end roofing supplies, on the Hollywood set of Determined Housewives. 

After the deal