Mask is attacked again: CEO testifying about Tesla’s acquisition
Before Tesla acquired a company called SolarCity in 2016, Elon Musk praised the deal as “brainless.” This is a combination of a major manufacturer of electric vehicles and a manufacturer of solar panels that can charge EVs. ..
It didn’t work that way exactly.
At the Delaware State Equity Court on Monday, Tesla’s CEO in a derivative suit arguing that Tesla’s acquisition was full of conflicts of interest, overlooking SolarCity’s fundamental weaknesses and failing to generate the profits Musk promised. Testify about the $ 100 million deal.
Asked under the oath, Musk will defend the purchase as a legitimate acquisition.
At the time of the purchase of all shares, Musk was SolarCity’s largest stakeholder and chairman. Seven shareholder proceedings alleging that Tesla’s directors succumbed to Musk’s intentions and agreed to acquire a struggling company violated fiduciary duty were merged into one. Where plaintiffs call it a clear conflict of interest, SolarCity was founded by Musk and his two cousins, Lindon and Peter Rive.
In August last year, the judge approved a $ 60 million settlement that would resolve all claims made to all directors of Tesla’s board of directors, except Mask, without admitting negligence. As a result, Mask, who refused to settle, was the only remaining defendant. The trial, which starts on Monday, was scheduled for March last year, but was postponed due to a viral pandemic.
Daniel Ives, an analyst at Wedbush Securities, called the acquisition a “clear black eye” for Mask and Tesla, largely because SolarCity wasn’t profitable.
“It was basically putting in good money after bad,” Ives said. “This is one of the weaknesses for all the successes and unimaginable heights that Mask has achieved.”
Most investors don’t value the company’s solar business, Ives said.
“I think Mask and Tesla underestimate the challenges and hurdles that businesses pose,” he said.
That said, Tesla believes Tesla’s energy business could still be “moderately successful.”
Tesla, which disbanded the media department, did not respond to Friday’s message asking for comments on the proceedings. In its 2020 annual report, the company claimed that the proceedings had no merit and Tesla would be willing to defend.
“We cannot estimate the potential loss or extent of loss associated with these claims,” the company’s report said.
Tesla’s energy generation and storage business generated $ 1.9 billion in revenue last year. This is 24% more than the previous year. Much of that revenue comes from selling battery storage units. Tesla has not specified whether the business has made a profit, and there are also liabilities and costs.
The proceedings filed by the plaintiffs allege that Musk has decided to buy SolarCity despite a clear conflict of interest.
Mask has a history of fighting government agencies and proceedings. He was forced to pay the Securities and Exchange Commission a $ 20 million fine for making a statement on Twitter about having money to keep the company private. However, he won a defamation proceeding filed by a British diver involved in the rescue of a Thai soccer team trapped in a flooded cave. Musk called the man “Pedguy” on Twitter.
Even if Musk ends the trial by having to pay personally for the entire SolarCity transaction, $ 2.5 billion won’t hurt the third wealthiest person in the world so much. Forbes magazine estimates that musk is worth about $ 163 billion.
Ives suggested that such payments would not have a serious impact on Mask’s wealth, but would undermine his reputation for choosing to buy.
Musk is fighting the proceedings after others have settled “because it’s what Musk is doing,” Ives said. “Earon believes this is the right deal and I think he still does.”