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Home / Business / Elon Musk knew that SolarCity broke down before merger with Tesla, the lawsuit claims

Elon Musk knew that SolarCity broke down before merger with Tesla, the lawsuit claims



When Tesla bought SolarCity in November 2016, Elon Musk billed the deal as a match made in green energy heaven: Combine a hot electric car company with the country's then-largest supplier of solar cell roof panels to create a one-stop shop for Clean Energy customers .

What Musk did not discuss at the time was that SolarCity was in big financial trouble.

Just weeks after the merger, SolarCity auditor Ernst & Young concluded that the company lacked "sufficient cash to meet its obligations". as a standalone company, according to court filings Monday.

In other words, SolarCity was almost insolvent when Tesla shareholders voted to pay $ 2.6 billion to the solar panel manufacturer and take on the debt, saving it from probable bankruptcy.

The filings are part of a lengthy lawsuit filed by shareholder Ellen Prasinos on behalf of all Tesla shareholders against Musk and Tesla's board, claiming they paid too much for SolarCity, ignored their own conflicts of interest and failed to disclose "disturbing facts" Which are essential for a rational analysis of the proposed agreement.

One allegation: SolarCity hid information from Ernst & Young about two payments due to lenders that should have been used to determine SolarCity's financial condition.

In its motion, plaintiff seeks summary judgment from the Delaware Chancery Court on key parts of the SolarCity case.

Tesla has not yet provided a legal response.

Tesla made a statement to The Times on Monday night: "These allegations are based on the allegations of plaintiff's attorneys looking for a payday, and are not representative of our shareholders who support our mission and ultimately voted for the acquisition. The allegations made in the plaintiff's summary are false and misleading, as Tesla and SolarCity published all material information in the proxy and other public filings that all shareholders had to consider before deciding on the transaction. "

In a lengthy and detailed filing of the court last year, Tesla questioned and answered dozens of charges contained in the lawsuit.

The plaintiffs claim that close ties between Tesla and SolarCity prior to the merger resulted in decisions that did not benefit shareholders. Musk was chairman of the board and CEO of Tesla, as well as chairman of the board and the largest shareholder in SolarCity. SolarCity was founded by Musk's cousins, Lyndon and Peter Rive, who ran it and sat on the board. Musk's brother, Kimbal, is a board member of Tesla and was also a board member of SolarCity.

Several other Tesla board members were also directly affiliated with SolarCity at the time, including:

  • Brad Buss, SolarCity's chief financial officer six months before the merger was announced.
  • Ira Ehrenpreis, a Tesla board member whose investment fund had a representative on the SolarCity board.
  • Antonio Gracias, an early investor in both Tesla and SolarCity and a board member in both. [1
    9659016FortheConnectiontoValidMuscleBrothersToDisassociatewiththeSolarCityAgreement

    In a further entanglement, another Musk company, the privately-funded SpaceX, had lent money to SolarCity to help keep the solar panel's cash position from plummeting below $ million a breach of bonds and possibly bankruptcy.

    Material retrieved from emails, documents, depositions and other evidence unsigned Monday There is a story about SolarCity's deep financial crisis that led to the merger with Tesla.

    In September 2015, SolarCity held weekly cash management meetings in an effort to keep the company afloat as sales and revenue went down. The next month, CEO Lyndon Rive and CFO Bus reportedly told Elon Musk that the company needed $ 180 million to $ 300 million in cash. According to the filing, SolarCity contacted several investment banks and private equity investors for new investments in equity or convertible bonds and was notified

    In February 2016, the SolarCity board struggled with how to avoid a bond default. According to the filing, Rive and Musk met separately to find ways to save money, and later this month, Musk told Tesla's chief financial officer to prepare a pitch for a acquisition of SolarCity to Tesla's board.

    In April, SolarCity board members heard from Rive and others that solar panel installations were expected to decline 28% for 2016, but the lawsuit claims the information never made its way to public investors.

    The filing cites "internal booking reports" at SolarCity using terms such as "drenched in a sea of ​​red."

    21. June 2016, the merger plan was announced, just weeks after Tesla raised around $ 1.5 billion in a secondary share offering. When the SolarCity agreement was announced, the Tesla share fell by 10%.

    Musk insists that by admitting himself to vote on the merger, he avoided a conflict of interest. In a recent deposition, he said “I couldn't be denied all discussions. I needed to say my opinion, obviously. "He expressed his views by lobbying investors, according to the filing, which claims Musk told his managing assistant that he needed to talk to large investors who were either neutral or negative to the merger.

    In October 2016, Musk whipped up the solar product voltage by unveiling a "sunroof" on the old set of ABC's "Desperate Housewives." The roof integrated solar cells with shingles, which were to be sold through Tesla stores and available for commercial distribution.

    The hellhole Musk held proved to be false, but it was not known when Tesla shareholders voted to acquire SolarCity in November 2016.

    The plaintiffs are still seeking damages and restitution for being paid by Musk and its board members Tesla, which is owned by its shareholders.

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