Musk Defends Solar City Merger

Issue 79

Elon Musk appeared in court on Monday to defend against claims of wrongdoing during the 2016 merger of Tesla Inc. and SolarCity Corp. The claims are coming from those who have heavily invested in Tesla stock and argue that the merger of the companies was in the interest of Musk alone and was his attempt to bail out SolarCity which he had a lot of ties with.

Back in 2016 Tesla Inc. purchased the company SolarCity Corp. for $2.6 billion. At the time Elon Musk was the chairman of both companies, however, he owned only 22% of Tesla Inc. Musk claims that the merger was an attempt to combine both companies into a single sustainable energy company allowing for combined resources and goals. Musk’s lawyers have also argued that since Elon was a minority shareholder of Tesla that he would be unable to make the acquisition without the support of other shareholders. In addition, they argued that at the time SolarCity was worth more than they paid for it, and all shareholders acted independently.

Despite Musk’s defense the case still remains, as the possibility that vital information was withheld from shareholders regarding the acquisition. The factor that will determine the outcome of this case is whether or not SolarCity was worth anything at the time of acquisition. If Elon were to lose the case, he would be required to pay over $2 billion which would be similar to the value of the original acquisition.

Last year Tesla’s other board members agreed to pay a total of $60 million as a settlement but it is clear that Musk is the Plaintiff’s main target. If Musk can convince the judge that he did not have a serious influence on the merger of the two companies then the case will likely be dismissed.

Source: Wall Street Journal