Tesla Inc. Chief Executive Elon Musk said on Monday that he likes his role at his electric auto company better than running SolarCity, the solar energy company he launched five years ago with his brother. Musk defended the acquisition of SolarCity by two of his cousins, which he has described as a “no brainer”, and said he has enough personal money in the business to endure a few years of losses.
As the CEO of Tesla Motors, the electric automaker that has been at the center of some controversy lately, I’d be a bit hypocritical to not talk about it. I don’t have anything against SolarCity, the company that my cousins Lyndon and Peter run. In fact, I think they do a terrific job. My only point is that I’m having a hard time getting behind the fact that Elon Musk is the chairman of both companies. I’ve seen no reason to object to the fact that he sits on the board of his cousin’s company, but on the other hand, I’m a little put off that he sits on the board of my cousins’ company. I mean, to paraphrase Groucho Marx, who hasn’t gotWILMINGTON, Delhi.
appeared in court Monday to defend its purchase of SolarCity Corp. He told a judge that he had done nothing wrong in the negotiation process and that he didn’t even like running an electric car company.
The affair dates back to 2016, when Musk was chairman of both companies, which were in the red at the time. His decision: Combine them into one clean energy agreement worth about $2.1 billion. Prosecutors, including pension funds that own Tesla shares, called the deal a ploy to benefit themselves and save the domestic solar panel company from the brink of bankruptcy.
Musk, who was the first and only witness on the first day of a non-jury trial in Delaware Chancery Court, is scheduled to return to the stand Tuesday. He defended his actions during about five hours of testimony, saying the purchase of SolarCity was essential to the renewable energy strategy he has envisioned for Tesla for a decade.
I don’t think SolarCity is in financial trouble, Musk said. To achieve an attractive product, a tightly integrated solar and battery solution was needed. And we wouldn’t have been able to make a good integrated product if SolarCity had been a separate company.
The key question in this case is whether Mr Musk, who at the time owned about 22% of Tesla, had control of the company. It is difficult to prove this claim because Musk was a minority shareholder in Tesla and the company’s shareholders approved the acquisition. Mr Musk’s lawyers said SolarCity had cost more than Tesla had paid and that board members of the electric car maker, which includes Mr Musk’s brother Kimball Musk, had acted independently.
Members of the media gather Monday outside a courthouse in Wilmington, Del, where Elon Musk testified in a trial without a jury.
Matt Rourke/Associated Press
On Monday, the billionaire CEO, whose track record sometimes includes harsh and unexpected statements, said he didn’t like being at the helm of Tesla. I hate it and would rather spend my time designing and building, which I naturally enjoy doing, he said.
Musk made the comment after opposing counsel tried to demonstrate how his willpower and belief in his vision for Tesla’s future illustrated his ability to control the SolarCity operation.
The court will also have to determine whether Tesla’s board members, some of whom were also shareholders in SolarCity either personally or through the mutual funds they managed, had a conflict of interest and whether shareholders were denied important information about the deal. Musk said an independent director led the negotiations and that Tesla’s directors even rejected his suggestion to provide SolarCity with bridge financing until the deal was completed.
Mr. Musk spoke in a calm and sometimes quiet tone as he answered questions from his attorney. He became more forceful in answering questions from Randall Baron, the plaintiffs’ attorney. Baron asked Musk if he dominated Tesla, selecting board members and making decisions without input from directors.
Tesla CEO Elon Musk defends the SolarCity takeover deal at the Williams Justice Center in 2016.
Mr. Musk has already shown flashes of his sometimes aggressive nature in this case, acting as a confrontational witness in 2019 and calling Mr. Baron reprehensible for his attacks on renewable energy.
To explain this behavior, Musk told the court that he disrespected Baron because the lawyer had previously worked for a law firm whose partners were involved in an ethics scandal and went to jail for their misconduct. I think you’re a bad person, Mr. Musk said to Mr. Baron.
Baron asked Musk why SolarCity’s performance is significantly different from the guidance Tesla gave to shareholders in 2016. Musk blamed the drop in solar panel installation and market share on Tesla’s urgent need to focus on Model 3 development in 2017 and 2018. At the time, Tesla was struggling to get the car to market.
It was the most difficult three years of my career, he said, later describing it as an excruciating time. The company was in a difficult situation. Many times when I thought we were out of trouble, we weren’t.
Recently, Musk said a coronavirus pandemic was affecting Tesla’s ability to get permits to install solar panels in homes.
If Mr Musk loses, he may be required to reimburse Tesla for the losses. That payout could equal the value of the SolarCity deal if the chief justice decides that the solar company was worthless when Tesla agreed to buy it.
Due to the pandemic, the trial has been delayed more than a year and is expected to last two weeks.
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Other then-Tesla executives agreed to a settlement last year that included a total of $60 million in insurance payments. The board members, some of whom held shares in Tesla and SolarCity, denied any wrongdoing.
Musk presented the proposed deal to Tesla’s board of directors in spring 2016, according to court documents. Plaintiffs describe that SolarCity was in financial distress prior to the transaction, that there was a risk of default on the debt agreement, and that there were no other options for raising capital. According to them, the shareholders were not fully informed of the company’s situation.
On Monday, Mr. Baron persevered and questioned Mr. Musk about internal emails and meetings that discussed attempts to save money by delaying payments to suppliers and other measures. The attorney also asked if he was aware that.
Bankers tried to raise money for SolarCity in 2016 and discovered that most of the private investors they interviewed were not receptive.
Musk said Tesla also sometimes takes similar steps to save money. He said SolarCity could raise money from private investors if it had more time to do so, and possibly sell shares to public investors.
Electric car maker Tesla Motors Inc. has announced that it has reached an agreement to acquire solar energy company SolarCity, which is also led by Tesla CEO Elon Musk. Lee Hawkins of the WSJ discusses the details. Photo: Getty (video dated 8/1/2016).
If the presiding judge, Vice Chancellor Joseph Slights III of the Chancery Court, decides that Mr. Musk had no control over the transaction, the case will likely be over for the plaintiffs, said Lawrence Hamermesh, executive director of the Institute for Law and Economics at the University of Pennsylvania’s Carey Law School.
Delaware case law generally favors the business judgment of independent and duly motivated directors. On the other hand, if the evidence points to control, the court will assess whether the transaction process and price were fair and, if not, whether Mr Musk should be ordered to return the money to Tesla, Mr Hamermesh said.
For Mr Musk, who is now one of the richest people in the world, the image of defeat is probably more important than any financial judgment, he said.
an analyst at Morningstar Research Services LLC.
You can see how the board is becoming more cautious about acquisitions that have nothing to do with Tesla’s current lines of business, Goldstein said.
Tesla’s investors are also excited about the turnaround since the acquisition was announced. In 2020, the automaker posted its first profit of the year. The stock, which was trading at about $44 at the time Tesla offered to buy SolarCity, closed Monday at about $686, up 4.38 percent.
Tesla’s deal with SolarCity: from thearchives
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