Musk under fire again: CEO to testify over Tesla acquisition
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.
“It basically was putting good money after bad,” Ives said. “For all the successes and all of the unimaginable heights Musk has achieved, this is one of the...
