Elon Musk Says “Not To Be An Auto Company” To Defend Tesla’s SolarCity Deal
WILMINGTON, Del. â Elon Musk said Tesla purchased SolarCity Corp. for a fundamental reason: to become more than a car manufacturer.
The chief executive of Tesla Inc. made this point as he wrapped up two days of sometimes fiery testimony in court, defending the roughly $ 2.1 billion merger completed in 2016 at a time when Tesla and SolarCity were in financial difficulty.
Vice-Chancellor Joseph Slights III, chairman of a shareholder lawsuit, elaborated on this logic of the deal at the end of Mr Musk’s testimony. âTesla was facing headwinds, had its own issues,â the judge said. “So why is it that Tesla is pursuing this acquisition of a solar company right now?”
âThe goal is not to be an automobile company. There are a lot of automakers, âMusk replied. “But an electric car maker is part of a sustainable energy future, just like solar and stationary storage.”
A group of shareholders allege that Mr. Musk controlled the takeover while having a financial interest in both companies, that many of its directors were in conflict and that Tesla overpaid for SolarCity. Mr Musk said he did not dictate the transaction process or price and recused himself from the shareholder vote.
Mr Musk fought again on Tuesday with plaintiffs’ attorney Randall Baron, opposing the attorney’s suggestions that he had “co-opted” Tesla executives to work on the deal outside of the United States. oversight of its board of directors. Mr Musk later said the lawyer “shot himself in the foot” as the two argued over Solar City’s share price at the time of the transaction.
SolarCity was founded by Mr. Musk’s cousins, and Mr. Musk was its chairman and largest shareholder at the time. The plaintiffs, which include pension funds that owned Tesla shares, called the deal a ploy to benefit Mr Musk and bail out a solar power company on the brink of insolvency.
Shareholders allege that Mr. Musk and Tesla did not accurately disclose during the transaction process how close SolarCity was to running out of money. Mr Baron asked Mr Musk about a July 2016 email written by his cousin, SolarCity CEO Lyndon Rive, in which Mr Rive said his business was “running out of cash.” Tesla’s offer to buy SolarCity was made public in June 2016.
âWere you surprised at the SolarCity situation? Asked Mr. Baron.
Mr Musk responded that SolarCity could have raised capital but could not easily tap the markets while Tesla’s offer to buy the company was on hold. “It was clear that SolarCity needed to raise capital, which they could do and had done several times already, but they couldn’t do it unless Tesla canceled the acquisition,” Musk said. .
Mr Musk’s defense is to show that even though he wanted the deal to happen, he did not dictate the terms and allowed an independent director, Robyn Denholm – now chairman of Tesla – to negotiate with SolarCity . He also said purchasing SolarCity was integral to creating a product that would link power generation to batteries called Powerwalls.
Mr Baron insisted to Mr Musk about the communications the Tesla CEO had with other officers, directors and advisers about the deal before a price was set. Referring to a remark by Mr Musk about offering a 30% premium to SolarCity’s recent share price, Mr Baron said: âSo you were involved in economic discussions.
Mr Musk reacted, as he has in other cases, saying his comments reflect a general approach to merger pricing. “I certainly did not engage in substantive discussions,” he said. âIt was done by the board of directors.
MM. Musk and Baron trained throughout the procedure. Mr Musk berated the lawyer during his testimony in 2019, when he called it “objectionable” for “attacking sustainable energy.”
Although the grid largely focused on the information provided to Tesla shareholders about SolarCity’s financial condition, Mr Musk sometimes went further in his answers, especially when it came to whether he had too much control over the purchase, a key issue in the essay.
On Monday, he said he didn’t like being Tesla’s boss. âI hate it, and would much prefer to spend my time on design and engineering, which is inherently what I love to do,â he said.
When Mr Baron asked Mr Musk on Tuesday if he had lied about when a SolarCity commodity would be ready to be sold in high volume, he replied: ‘I am used to being optimistic. . Mr. Baron retaliated: âIt’s more than optimistic. It is simply not true. “
The Tesla chief has also targeted rival dual-shareholder companies that may give more power to certain shareholders. He criticized Ford Motor Co.
, where the two-class stock structure gives the family greater control, and Facebook Inc.,
where founder and CEO Mark Zuckerberg has additional voting powers, among others. Mr. Musk’s Tesla shares do not carry any additional voting rights. Ford declined to comment and Facebook did not respond to a request for comment on Mr. Musk’s remarks.
If Mr. Musk loses, we could ask him to fix Tesla. That payment could equal the value of the SolarCity transaction if the court president finds the solar company to be worthless when Tesla agreed to buy it.
Other members of Tesla’s board at the time of the merger agreed to settle a combined $ 60 million last year, paid for by insurance. Board members, some of whom had interests in both Tesla and SolarCity, denied the wrongdoing.
Mr Musk’s brother Kimbal Musk was then called to the bar, with several other current and former members of Tesla’s board expected to follow. Mr. Musk’s cousins ââand SolarCity co-founders Lyndon and Peter Rive are also expected to be called out. A verdict can be months away.
Lee Rudy, another lawyer for the plaintiffs, asked Kimbal Musk if his financial ties to other members of Tesla’s board of directors affected his independence. Kimbal Musk had asked his brother for a $ 10 million loan a few months before Mr. Musk first asked Tesla’s board of directors to buy SolarCity. The money, Kimbal Musk said, was meant to be invested in his restaurant business.
Kimbal Musk applied for the loan because his fortune was tied up in stocks, part of which was in SolarCity and had recently fallen in value, he said. His brother did not grant the loan, Kimbal Musk said.
Kimbal Musk said he represented the interests of Tesla shareholders by supporting the SolarCity deal and believed solar power “was going to be the biggest industry in the world.”
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