Elon Musk’s Trial Charges over Tesla’s Acquisition of SolarCity Corp.

Elon Musk’s Trial Charges over Tesla’s Acquisition of SolarCity Corp.

July 27, 2021 0 By Stephen Callahan

Elon Musk is the chief executive of Tesla Inc., an electric car manufacturing company. He has been facing trials over his company’s acquisition of SolarCity Corp in 2016. The presiding judge, Joseph Slights, questions Tesla’s motive since it had been experiencing financial challenges, making its expansion project to acquire SolarCity Corp unwarrantable. However, Elon justifies the acquisition claiming that Tesla is a manufacturer of electric-powered automobiles with the primary goal of environmental conservation. Therefore, their acquisition of SolarCity Corp is based on a common motive of sustainable energy. Also, he justifies the decision claiming that Tesla needed to diversify beyond only being a car manufacturing company, and no other field presented better ground for them than a solar energy company.

Musk faced accusations of having a financial interest in the deal disclosed in June 2016. The plaintiff complained that Musk’s cousins established SolarCity, Musk was the chairman and owned most shares. Therefore, Tesla’s acquisition of SolarCity was ill-mooted as Musk intended to bail it out from insolvency. This claim is further enhanced by the accusation that Musk decided on it regardless of the several conflicts among Tesla’s directors. The court even accused Musk of dictating the deal’s valuation without the support of his fellow directors. Musk’s defense, however, is based on his assertion that he allowed directors to discuss the agreement without his oversight as Tesla’s chief executive.

Mr. Musk also faces trials over non-disclosure of the whole deal. Some shareholders argue that SolarCity could not redeem itself, and Musk led its acquisition for personal benefits. Randall Baron, a lawyer leading the plaintiffs’ team, specifically questions an email that Lyndon Rive, the chief executive of SolarCity, wrote to Musk, citing the low financial performance of SolarCity. However, Musk responds that the company had faced similar circumstances and successfully handled them without selling shares. He also defended himself, citing that he did not force the deal and only allowed other Tesla’s executives to take charge, for instance, Robyn Denholm, the new director of Tesla. He also distanced himself from any direct engagements over price negotiations regarding the deal.

Musk laments and even regrets being the Tesla boss, citing that he’d rather embark on his illustrious engineering and design instead of facing trials and acquisitions for decisions he never took on behalf of the company. He even mentioned other companies where certain shareholders hold more powers over the rest, which was not his case, giving examples of Facebook and Ford Motors.