TESLA FACES LAWSUITS

SolarCity deal opposed

Tesla Motors Inc. faces a potential delay in its acquisition of SolarCity Corp. from four shareholder lawsuits, creating added urgency as both companies use up cash.

The suits by four different shareholders, outlined in a regulatory filing Monday, all allege that Tesla’s executives and board breached their fiduciary duty by entering into the pact because chairman Elon Musk and other Tesla insiders hold shares in both companies. One plaintiff seeks an injunction to stop the transaction, potentially holding up a deal until a hearing on Oct. 18 at the earliest. The cases are without merit, Tesla said in the filing.

Tesla will oppose the lawsuits, the company said in an emailed statement. “Simply because someone uses litigation to try to delay an acquisition does not mean it will be successful,” the statement said. “At this point, it is not yet known if anyone will even end up pursuing such a request.”

While shareholder litigation is common in deals and Delaware courts tend to side with management, the companies’ entwined nature may bring greater scrutiny. That could be troublesome for both firms: Tesla plans to raise cash later this year both to further develop electric cars and to fund the merged company’s operations, and SolarCity disclosed after its secondquarter earnings that it was getting close to default on its existing debt.

“It will be very difficult for the courts to blow this off,” said James Cox, a professor at the Duke University School of Law. “It’s a highprofile case, it’s a self-dealing case. This gets a much deeper look than most others would.”

Both companies are unprofitable and need cash.