Musk defends SolarCity acquisition
WILMINGTON, Delaware, July 12, (AP): Tesla CEO Elon Musk took the witness stand Monday to defend his company’s 2016 acquisition of a troubled company called SolarCity against a shareholder lawsuit that claims Musk was to blame for a deal that was rife with conflicts of interest and failed to produce the profits he had promised.
In a sometimes testy exchange with a plaintiffs’ attorney, Musk denied any conflict of interest, saying he had nothing to gain from the all-stock acquisition because he owned shares of both companies.
“Some of your questions,” he told the opposing attorney,” are really tricky and deceptive.”
In the runup to Tesla Inc.’s 2016 acquisition of a company called SolarCity, Elon Musk hailed the deal as a “no brainer” - a purchase that would combine the leading maker of electric vehicles with a manufacturer of solar panels that can recharge EVs.
It didn’t exactly work out that way.
On Monday in the Delaware Court of Chancery, the Tesla CEO will testify about the $2.5 billion deal in a shareholder lawsuit that alleges that Tesla’s acquisition was rife with conflicts of interest, overlooked SolarCity’s fundamental weaknesses and unsurprisingly failed to produce the profits Musk had promised.
Questioned under oath, Musk plans to defend the purchase as a justifiable acquisition.
At the time of the all-stock purchase, Musk was SolarCity’s largest stakeholder and its chairman. Seven shareholder lawsuits, consolidated into one, alleged that Tesla directors breached their fiduciary duties in bowing to Musk’s wishes and agreeing to buy the struggling company. In what the plaintiffs call a clear conflict of interest, SolarCity had been founded by Musk and two of his cousins, Lyndon and Peter Rive.
Last August, a judge approved a $60 million settlement that resolved claims made against all the directors on Tesla’s board except Musk without any admission of fault. That left Musk, who refused to settle, as the sole remaining defendant. The trial that begins Monday had been scheduled for March of last year but was postponed because of the viral pandemic.
Daniel Ives, an analyst at Wedbush Securities, called the acquisition a “clear black eye” for Musk and Tesla, in large part because SolarCity has failed to turn a profit.