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HomeNewsMask testifying to Tesla's $ 2.6 billion acquisition of SolarCity - News

Mask testifying to Tesla’s $ 2.6 billion acquisition of SolarCity – News


Elon Musk has embodied Tesla for over a decade and has become the company’s glorious ambassador for the electric vehicle revolution. On Monday, Showman’s CEO tries to prove to a Delaware judge that he doesn’t control the company, whatever his excellence.

Musk is the first and most promising witness in a trial over the once-flying acquisition of SolarCity, which had plummeted shortly before Tesla’s acquisition of Tesla for $ 2.6 billion in 2016. ..

Opponent Tesla shareholders use the automaker’s balance sheet to bail out one of his epic projects, rather than creating an integrated clean energy power plant as Musk claimed. Claims to have designed the acquisition.

Despite only 22% economic and voting interest in Musk’s company, the accused shareholder said Musk’s persona power allowed him to control Tesla’s board of directors. Insist.

Tesla declined the argument, adding that Tesla’s unrelated shareholders overwhelmingly voted to approve the acquisition of SolarCity. If the court finds that Musk has acted as a controlling shareholder, Musk will face higher legal standards in proving that the transaction is reasonable for all shareholders.

This decision can have significant implications, as corporate law addresses the impact of the Almighty Founder’s CEO, especially in the technology sector.

Anne Lipton, a professor of law at the University of Tulane, said: “This proceeding may provide not only the court, but also transaction planners with more guidance on the factors that the court may take into account when determining whether someone is an administrator. Have sex in New Orleans.

SolarCity was founded in 2006 by Elon Musk and his two cousins ​​© Michael Nagle / Bloomberg

SolarCity was founded in 2006 by Mask and his cousins ​​Peter and Lyndon Rive. The company has installed rooftop solar panels for customers who pay SolarCity for the electricity they generate. By 2016, SolarCity was listed, but due to the capital-intensive nature of its business model, it had total debt of over $ 3 billion and was at risk of violating its minimum liquidity contract.

Tesla’s shares fell one-tenth on June 21, 2016, when the merger of SolarCity was announced, losing $ 3 billion in market value above the acquisition price.

Goldman Sachs equity research analysts wrote that at the time, energy companies were “worst-positioned” companies in the solar startup segment.

Still, in late 2016, nearly 90% of unrelated Tesla shareholders who sent ballots voted to approve the deal in support of Mask’s vision for the merged company. No shareholder voting was required to complete the acquisition, but Tesla wanted to inoculate it from awkward legal issues by voting.

Anyway, the opponents of the transaction filed a proceeding.

Line graph of storage deployment (gigawatt hours) showing Telsa's consumer solar energy business has begun to expand

In early 2018, Joseph Slights, Deputy Prime Minister of the Delaware State Equality Court, dismissed the board’s motion to dismiss the shareholder’s objection, saying, “Musk is the controlling shareholder of Tesla’s board of directors in connection with the acquisition. It is reasonably possible that he dominated. ” There were virtually no steps to separate Musk from the board’s consideration of the acquisition. “

In a court document, Musk’s lawyer wrote: “Evidence of the trial shows that Musk did not control Tesla’s board in connection with the acquisition. Musk was denied a board vote in connection with the acquisition and actually made other board members. In fact, Tesla’s board of directors exercised independence from musk. “

Delaware courts usually do not find that only about one-fifth of the shares are eligible for control. However, Silicon Valley start-ups by the visionary founder CEO may prove to be a unique corporate governance dilemma.

“Shareholder lawyers are actively pushing to control shareholder doctrine, and Chancery judges want to consider this issue more and more,” said law professor Lipton.

Tesla’s shareholders are also arguing in addition to the controller’s argument, which could impose high legal standards on Mask. They claim that Tesla’s directors, many of whom had a relationship with Mask through SolarCity or his SpaceX business, were in conflict. They also claim that SolarCity’s dire situation was not properly disclosed in the SEC filing.

In their proceedings, SolarCity claimed it wasn’t worth it because it went bankrupt, but before Tesla announced its 2016 offer, the deal was about $ 2 billion.

Line chart of stock price ($) showing Tesla's stock price performance

Tesla’s share is more than 15 times the June 2016 level. The company’s solar PV installations, measured in megawatts, increased by nearly one-fifth in 2020 compared to the previous year.

In January 2020, Tesla’s directors other than Musk settled their claims for $ 60 million to be funded by the company’s corporate insurance. Musk remains the only unresolved defendant.

His testimony could prove colorful if his June 2019 deposit in the case is any sign.

Musk repeatedly accused shareholder lawyer Randall Baron of asking him, calling him “blame”, “shameful”, and Musk “sad about the future” and “economic devastation.” That’s right.

Musk also provided a summary of his legal debate in the deposit. The Tesla / SolarCity deal is “stocks for stock trading,” and the proceedings “try to guess expert investors again about what the combination ratio will be,” he said. “enter [legal] Precedent, it will be a disaster for America. “

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