Elon Musk is about to appear in court for the 2016 acquisition

Tram Ho

In 2016, Elon Musk held two unprofitable businesses, Tesla and SolarCity Corp. The South African-born billionaire decided to ‘cut losses’ by closing one to merge into one.

Five years later, Elon Musk was summoned to court to clarify the $2.1 billion acquisition that day.

The plaintiffs, including several pension funds that invest in Tesla stock, argue that there is ambiguity here in acquiring a “family” solar company that is no longer profitable. SolarCity was founded by two of Elon Musk’s cousins, Lyndon Rive and Peter Rive.

Elon Musk will be summoned to court on Monday (US time) as chairman of both companies. Elon Musk’s lawyers argue that the acquisition is an opportunity to fulfill Musk’s long-term goal of creating a vertically sustainable energy company.

Elon Musk sắp hầu tòa vì vụ thâu tóm năm 2016 - Ảnh 1.
SolarCity was a company specializing in rooftop solar installation before it was acquired by Tesla.

The main question here for Elon Musk, who currently owns about 22% of Tesla shares, is whether or not Musk has covered all of this in this deal. Proving that is not easy because other Tesla shareholders have all accepted the transaction.

Elon Musk’s lawyers also argued that SolarCity was worth much more than when Tesla bought it and other members of the Board of Directors like Kimbal Musk made independent decisions without the influence of his brother Elon Musk. .

Other issues revolved around whether the opinions of the Tesla Board of Directors conflicted with each other and whether important information about the deal was kept private from shareholders.

If the lawsuit is lost, Elon Musk may have to return the money from this deal to Tesla. The return value could be equal to the purchase price of SolarCity at the time if the judge finds that the solar company was worthless at the time Tesla agreed to buy.

The trial was delayed for more than a year due to the effects of Covid-19. Elon Musk is the only member of the Board of Directors to be sued. Other members agreed to settle the lawsuit last year with a total of $60 million in fines, covered by insurance.

The lawsuit file shows that Elon Musk proposed to buy SolarCity to the Tesla Board in 2016. The plaintiff alleges that SolarCity had financial problems and that the Tesla Board was not provided with this information.

Before being acquired, SolarCity had a net loss of $769 million and $375 million in 2015 and 2014.

Elon Musk sắp hầu tòa vì vụ thâu tóm năm 2016 - Ảnh 2.

SolarCity, after being acquired by Tesla and merged into a new segment, has insignificant profit contribution.

Analysts say Elon Musk may be questioned about his level of involvement in the deal, from which the court can consider whether the Tesla CEO controls the deal. Similar questions are asked of some directors to find out whether they make decisions independently.

Similar cases show that the chairman often relies on the independent motives of the directors. Even if there is evidence of Elon Musk’s control, the court will still re-evaluate the value of the deal and only if it is considered a ‘wrong purchase’, Musk will have to pay the money back to the company.

Elon Musk is no longer a stranger to court appearances. In 2019, Musk was sued for defaming a British cave explorer in the rescue of a young soccer team in Thailand. The jury then found Musk innocent.

Even before that, the US Securities and Exchange Commission (SEC) sued Elon Musk for misleading investors through social media posts. Musk settled the lawsuit by paying a $20 million fine and agreeing to censor some posts before they were posted online.

According to WSJ

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Source : Genk