In 2016, Elon Musk convinced the rest of the board of Tesla to buy the solar energy company SolarCity for 2.5 billion dollars – equivalent to 21.8 billion kroner, reports Marketwatch. At the time, he called the acquisition a “no brainer” and promised a profit. SolarCity has the benefit of producing that profit.
How could Musk be so sure that SolarCity would be a bargain? He was chairman of the board and main shareholder in the company.
SolarCity was an American solar energy company, which sold, installed and financed solar cell projects, mainly on private houses and smaller commercial buildings. In 2015, it was the United States’ third largest installer of solar cells, until it was acquired by Tesla for $ 2.5 billion, in 2016. Then it changed its name to Tesla Energy.
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The shareholders are suing the board
Elon Musk was thus a buyer and seller. This is the opinion of a group of Tesla’s shareholders, making the acquisition crammed with illegal conflicts of interest. On that basis, seven individual shareholder groups – merged into one case – have sued Tesla.
“It was basically like throwing good money at bad,” said Daniel Ives, an analyst at Wedbush Securities.
Last August, a judge approved a $ 60 million settlement between the plaintiffs and the directors of Tesla, without admitting guilt. All the directors reached a settlement, except Elon Musk – he takes the case to court.
– Musk continues to fight against the plaintiffs, even after the others have reached a settlement, because that is what Musk does. “I think Elon still thinks it was right to buy SolarCity,” said Ives.
The case was actually scheduled for March 2020, but due to the pandemic, it was postponed until Monday. It will take place in a courtroom in Delaware.
The back of the coin
Musk is sued for 2.5 billion. Potentially, he will be personally liable for damages.
– Among all the incredible successes Musk has managed, this is one of the bottom points. I think Musk has underestimated the challenge and competition in the market, said Ives.
For Musk’s personal finances, however, it will not be dramatic. Forbes has estimated that he is worth in the region of around 163 billion dollars. He is unlikely to lose $ 2.5 billion a night’s sleep. However, it could damage his reputation.
– It can damage his credibility when it comes to acquisitions, Ives concluded.
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