Tesla CEO Elon Musk to defend $ 2.6 billion SolarCity acquisition in court later today
Tesla shareholders argued that the SolarCity acquisition deal in 2016 was not fully transparent. Elon Musk’s lawyers will defend their position in court today.
On Monday, July 12, billionaire Elon Musk will be in court for defend its acquisition of SolarCity for $ 2.6 billion in 2016. Shareholders sued Elon Musk and other members of the board of directors of Tesla Inc (NASDAQ: TSLA) alleging the deal represented a bailout of SolarCity.
Shareholders also alleged that the deal unjustly enriched the Musk family. Additionally, they said Musk and other members of Tesla did not disclose crucial details of the deal. Thus, they face charges for breach of their fiduciary responsibilities.
Musk noted that he was “completely saved” from the deal negotiations. However, Musk is among the only defendants in the case ready to fight in court. The hearing is scheduled to take place later today at Delaware Chancery Court.
Vice-Chancellor Judge Joseph Slights III will have to decide whether Musk was a conflicting majority shareholder or whether he ensured the standard of “full fairness” in the treatment of this acquisition of SolarCity. Basically, the court hearing is about deciding whether Elon Musk was acting in the best interests of Tesla shareholders. In addition, it aims to find out whether Musk has disclosed any crucial information to shareholders regarding the acquisition.
Note that the lawsuit was filed by investors on behalf of the company. So, if the plaintiffs win, the proceeds will go to Tesla and not to the litigants.
Filing Details: CEO of Tesla and SolarCity
According to the record filed with the Chancellery Court, Elon Musk owned 22.1% of Tesla’s common stock at the time of the transaction in 2016. In addition, he also held an additional 21.9% in SolarCity. Operating in the capital-intensive residential solar development market, SolarCity has struggled to lose money.
Later today, lawyers for Musk will argue that the SolarCity deal did not hurt shareholders. In addition, it will also prove that shareholders voted overwhelmingly to approve the acquisition. Tesla has come a long way since closing the acquisition agreement in 2016. TSLA’s stock price has exploded several times during the same period.
Interestingly, Tesla alone is not part of the conflict. Elon Musk’s aerospace company SpaceX also invested $ 255 million in SolarCity bonds between 2015 and 2016. Thus, four members of Tesla’s board of directors directly or indirectly held shares of SolarCity at the time of the acquisition. .
In 2016, Musk called the acquisition of SolarCity a natural combination of its businesses and a way for Tesla to continue its environmental missions. At the time, he called the merger “obvious” while adding “I don’t think this creates additional financial risk for Tesla”.
Even with Tesla continuing the acquisition, SolarCity faces a liquidity crunch and Musk knows it well. In addition, in recent years, the company has repeatedly delayed the mass production of solar glass tiles. Although Musk presented the production-ready prototypes in 2016, they were found to be non-functional.
Retail giant Walmart Inc (NYSE: WM) Tesla sued after the fire broke out on panels installed by SolarCity atop their facilities.
Bhushan is passionate about FinTech and has a good flair for understanding financial markets. His interest in economics and finance draws his attention to the new emerging markets of Blockchain technology and cryptocurrency. He is continually in a learning process and remains motivated by sharing his acquired knowledge. In his spare time, he reads thrillers and occasionally explores his culinary skills.