Elon Musk Under Fire Over Tesla Acquisition
- ByAyushi Ray | July 13, 2021
Elon Musk under fire, he will testify over Tesla acquisition. 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. He will be questioned under oath, Musk plans to defend the purchase as a justifiable acquisition. When the purchase all-stock occurred, 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 lowlights.” Most investors, Ives said, place no value on the company’s solar business. “I just think Musk and Tesla underestimated the challenges and the hurdles that the business brings,” he said.
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