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Tesla CEO Musk will be tried on Monday for $ 2.6 billion in SolarCity deal – News


Elon Musk will speak at SolarCity’s Inside Energy Summit in New York.

Rashid Umar Abbasi | Reuters

Tesla CEO Elon Musk is set to appear in court on Monday, and the risk is high. If he loses, he may have to pay more than $ 2 billion from significant personal property.

Musk will be the first witness to a trial defending Tesla’s $ 2.6 billion acquisition of SolarCity. Shareholders sued Musk and Tesla’s board members, claiming that the 2016 deal was equivalent to SolarCity’s bailout.

They also claim that it unfairly enriched the Musk family, one of its largest shareholders, and Musk and others did not disclose all relevant details and violated their fiduciary duty. .. Musk claimed that he was “totally rejected” from negotiations on the deal.

The board members nominated in the proceedings last year Tesla $ 60 million shareholders without admitting cheating. Musk, the second wealthiest person in the world, was the only defendant who chose to dispute in court.

No jury has persuaded this issue. His fate is determined by Deputy Prime Minister Joseph Slights III, a judge in the Delaware Court of Equity.

Days in court

Masks have legal issues beyond SolarCity.

For example, the SEC sued him for fraud in 2018, with Mask and Tesla each paying $ 20 million. Musk was charged after tweeting about keeping Tesla private for $ 420 a share. This move has caused Tesla’s stock price to skyrocket. Musk had to temporarily abandon his role as chairman in Tesla as one of the conditions of the settlement.

In another case, cave exploration expert Vernon Answorth won after Tesla’s CEO stated that Musk had defamed him. Called him a “pedophile” On Twitter. His lawyer argued that “pedogai” was an enthusiastic rhetoric and did not mean a statement of facts.

Tesla and Musk face many other proceedings, including a proceeding over Mask’s unprecedented CEO compensation package and numerous federal investigations, according to the company’s own financial statements.

In the case of SolarCity, the judge must determine whether Musk was a conflicting controlling shareholder who met the “perfect fairness” criteria in handling the acquisition of SolarCity.

In other words, did Musk act in the best interests of Tesla’s shareholders? And did Musk tell shareholders everything they deserve to know?

This type of proceeding, known as a derivative suit, is filed by investors on behalf of the company, not the individual or the funds themselves. If the plaintiff wins, the proceeds could be sent to Tesla instead of the stakeholder who filed the proceedings.

Company connection

According to a filing with the Chancery Court, Musk owned 22.1% of Tesla’s common stock and 21.9% of SolarCity at the time of the transaction. SolarCity was a problematic asset that was draining cash in the capital-intensive market of introducing residential solar power.

Tesla Inc, located in Buffalo, NY, USA, Wednesday, December 26, 2018. Vehicles are parked outside the solar panel factory in Japan.

Andrew Haller | Bloomberg | Getty Images

Musk’s lawyer is expected to claim that SolarCity’s deal did no harm to shareholders and voted overwhelmingly to approve the acquisition. After all, Tesla’s stock will move 5 to 1 from a closing price of $ 43.92 on June 21, 2016 (when Tesla announced that it would bid on SolarCity) to a closing price of $ 656.95 on Friday, July 9, 2021. Soared in. Stock split last year.

The company is also currently participating in the S & P 500 and reports profits on a regular basis.

SolarCity was founded and operated by Mask’s cousins ​​Lindon and Peter Rive, but was backed by Mask, who chaired the board of directors. Meanwhile, he was Tesla’s CEO and chairman of the company.

It wasn’t his only potential conflict. SpaceX, Musk’s aerospace venture, invested $ 255 million in SolarCity bonds from March 2015 to March 2016. At the time the acquisition was being considered, four members of Tesla’s board of directors owned the shares of SolarCity directly or indirectly. Some Tesla board members also held shares in SpaceX and participated in the board.

How he pitched it

For Musk and many of his advocates, the 2016 acquisition of SolarCity is a natural combination of his company and represents how Tesla pursues an environmental mission with a wider range of products. Homeowners can finance and install solar rooftop panels from the same companies that provided electric vehicles, home charging stations, and backup batteries for energy storage.

Tesla already launched its energy sector in late 2015, where household batteries were called Powerwalls and other large batteries were used by businesses and utilities.

By June 2016, Musk said Tesla would bid $ 2.8 billion to buy SolarCity. “I don’t think this poses any additional financial risk to Tesla,” he said at the time, calling the merger “blindly obvious.”But Tesla investors SkepticalAt the time of the announcement, the stock price plummeted by more than 10%.

July 2016, musk Presented his vision Tesla’s achievements as a car innovator and renewable energy giant in his famous “Master Plan Part Deux”.

As CNBC previously reported, unsealed court documents, including emails between Musk and SolarCity executives, later reveal that he knew he was facing SolarCity. Probably. “Liquidity crisis” Even when Tesla pursued an acquisition.

“Three things need to happen to change investor sentiment: SolarCity solves the liquidity crisis, LOI with Panasonic to address solar production risk, and a joint product demo.” Said Musk to SolarCity executives in September of that year. “You should be able to do all this before the shareholder vote.”

In October 2018, Tesla and SolarCity jointly announced a combination of solar roof and battery pack. Musk, a set of Hollywood’s Desperate Housewives, showed off something that looked like a solar panel, was miniaturized, and was smooth enough to be mistaken for a high-end roofing material.

After trading

The hype event helped him change the mindset of investors. In November, the transaction was approved by a vote of 85% of shareholders. But after the closure, Tesla’s SolarCity business will decline.

Over the years, the company has repeatedly delayed the mass production of solar glass roof tiles. What Musk presented as a production-ready prototype in 2016 was a design prototype that didn’t really work.

Wal-Mart sued Tesla After the panel broke out, the company installed it on top of the facility.Former Tesla Energy employee Whistleblower complaints Federal agency on Tesla’s solar rooftop fire risk. And Panasonic withdrew from Tesla’s takeover Buffalo plant after it became clear that Tesla wouldn’t manufacture solar roof tiles.

Tesla’s solar roof tiles haven’t taken off, but the company’s energy storage products have collapsed due to growing demand for low-cost electricity from renewable energy sources around the world.

In a trial beginning Monday in Wilmington, Delaware, Musk will be represented by lawyers from Los Arronstam & Moritz (David E. Ross, Garrett B. Moritz, Benjamin Z. Grossberg). The trial will be held until July 23, 2021, unless the entity seeks a settlement before seeking a settlement.

Source link Tesla CEO Musk will be tried on Monday for $ 2.6 billion in SolarCity deal

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