Once again, billionaire entrepreneur Elon Musk has landed himself in hot water. Tesla’s shareholders are currently suing the CEO. The group alleges that Tesla’s acquisition of the solar panel firm was, in fact, simply a bailout pushed through by Musk.
Shareholders assert that Musk was improperly involved in the situation and pushed the deal through when he should have been fully recused instead. The group believes he acted in his own interests rather than that of the shareholders.
At the time of the 2016 deal, Musk was chairman of the board at both businesses concurrently. He also owned a 22% stake in both Tesla and SolarCity – the latter of which was founded by Musk’s cousin.
The shareholders also believe that Musk was not transparent enough with Tesla’s voting shareholders about different aspects of the deal. An issue that arose was SolarCity’s financial health – when Tesla acquired the firm, it took on billions in debt.
The lawsuit was brought by union pension funds and asset managers who maintain that Musk coerced Tesla’s directors into buying SolarCity, which was short on money, for $2.6 billion.
On Tuesday, Elon Musk told judges that Tesla had to buy failing solar panel company SolarCity. The solar firm was key to the EV-maker achieving its long-term goal of transitioning to sustainable energy. Musk said that back in 2016, Tesla was having trouble developing its Powerwall battery system as it was tricky to integrate with external solar power systems.
“If we have a whole bunch of third-party solar systems, it’s a messy situation. We needed solar within Tesla,” Musk told the judge.
In addition to repeatedly defending the need to acquire SolarCity quickly, Musk has steadily told the court that the Tesla board primarily handled the deal. The CEO added that he removed himself from monetary negotiations and that a suggestion he made in a meeting about a potential offer was overruled.
Another issue that came into focus during the court session was the shortage of Tesla’s Powerwall. The firm has a demand for 80,000 units but won’t be able to make even half of that this quarter. The CEO placed blame on the ongoing chip shortage.
In 2015, a year before the SolarCity acquisition took place, Tesla showcased its Powerwall at a launch event for Tesla Energy. The Powerwall is essentially an energy storage system designed to work with solar panels. At the time of the announcement, Musk did not specify any brand of panels.
However, this week in court, Musk claimed that the production of the Powerwall batteries would not have been possible without the acquisition of SolarCity.
“We were beginning development of the Tesla Powerwall battery. And in order to have a compelling product, you really needed to have a tightly integrated solar and battery solution. And we could not create a well-integrated product if SolarCity was a separate company,” he told the shareholders’ attorney.
Simultaneously, Tesla is facing proposed class-action lawsuits in California and Pennsylvania from disgruntled customers. In the first quarter of 2021, the firm not only upped the price of its solar installations, but it made it a necessity for clients ordering solar panels or Tesla Solar Glass Roof tiles to order the Powerwall, too. This is causing upset among customers who had already prepared financing and made changes in their homes to prepare for Tesla’s solar installations.
“I rather hate it and I would much prefer to spend my time on design and engineering,” Elon Musk told the court, referring to his thoughts on being Tesla’s CEO. The trial, which is expected to last approximately two weeks, likely exacerbated his feelings.
Attorney for the shareholders, Randall Baron, exchanged some harsh words with Musk, later warning him that the court battle was “going to be a grind.”
“I can tell by the binder,” came Musk’s response as he gestured to Baron’s large folder of documents.
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