Elon Muskek Tesla SolarCity | will be declared due to the purchase by Automotive News

On Monday, Elon Musk will take a stand on Tesla’s 2016 lawsuit against SolarCity to defend its $ 2.5 billion shareholder lawsuit, alleging that the deal had conflicts of interest.

When Tesla Inc bought a company called SolarCity in 2016, Elon Musk didn’t mean that deal – a purchase that would combine a leading manufacturer of electric vehicles and a manufacturer of solar panels. It can charge EVs.

It didn’t exactly come out that way.

In the Delaware Chancery Court on Monday, the Tesla director will testify about a $ 2.5 billion deal that ignored Tesla’s purchase interest conflicts, ignored SolarCity’s key weaknesses, and surprisingly failed to make the profits promised by Musk in a shareholder lawsuit.

Asked under oath, Musk intends to defend the purchase as a justifiable purchase.

At the time the shares were purchased, Musk was the main stakeholder in SolarCity and its chairman. Seven shareholder lawsuits, combined into a single one, complained that Tesla executives had violated fiduciary duties while respecting Musk’s wishes and agreeing to buy the struggling company. In what the plaintiffs call a clear conflict of interest, SolarCity was formed by Musk and his two cousins, Lyndon and Peter Rive.

Last August, a judge granted a $ 60 million settlement to all Tesla board directors except Musk for resolving claims made without admitting any errors. This left Musk, who refused to live, as the only remaining defendant. The trial, which begins on Monday, was scheduled for March last year but was postponed due to the COVID-19 pandemic.

Daniel Ives, an analyst at Wedbush Securities, called the purchase a “light black eye” for Musk and Tesla, largely because SolarCity did not make a profit.

“It was basically putting good money after bad money,” Ives said. “Because of all the success that Musk has achieved and all the heights imaginable, this is one of the lowest lights.”

Most investors, Ives said, have no value in the company’s solar business.

“I think Musk and Tesla have underestimated the challenges and obstacles that come with business,” he said.

That said, Ives believes Tesla’s energy business could still have “modest success”.

Tesla, which has disbanded its media relations department, responded to a message on Friday asking for no comment on the lawsuit. In its 2020 report, the company argued that the lawsuit had no merit and that Tesla would defend itself.

“We are unable to calculate the loss or range of losses associated with these claims,” the company report said.

Tesla’s energy generation and storage business had revenue of $ 1.9 billion last year, 24 percent more than the previous year. A large portion of that revenue came from the sale of battery storage units. Tesla doesn’t specify whether the business won, and it also has debt and expenses.

The lawsuit filed by the plaintiffs alleges that Musk pushed for a decision to acquire SolarCity despite his clear conflict of interest.

Musk has a history of fighting government agencies and litigation. He was forced to pay a $ 20 million fine to the Securities and Exchange Commission for failing to make statements about Twitter having money to take him private in the company. But a British diver who took part in the rescue of a Thai football team trapped in an underwater cave won the defamation lawsuit. Musk called the man a “pedo guy” on Twitter.

Even if the lawsuit ends with Musk having to pay the entire SolarCity deal in person, the $ 2.5 billion won’t do much damage to the world’s third-richest. Forbes magazine estimates that Musk is worth about $ 163 billion.

Ives suggested that while this payment would not seriously affect Musk’s wealth, it would damage his reputation for choosing to shop.

Musk is fighting the lawsuit after others resolved “because it’s what Musk does,” Ives said. “I think Elon thinks it was the right deal and he still does.”