UPDATE 1-Teslas Musk pressed for SolarCity deal despite major monetary rules
(Adds Tesla statement, sections 4 and 11)
23. September (Reuters) – Tesla Inc chief Elon Musk urged investors to approve the 201[ads1]6 acquisition of SolarCity at a large market value premium despite knowing the solar installer faced a cash crunch and publicly stated that he had waived involvement in the agreement, according to court documents that were not sealed on Monday.
The filing was part of a lawsuit from Tesla shareholders alleging the company's board breached its obligations to investors by approving the $ 2.6 billion acquisition of the struggling company, which was run by Musk's first cousin and of which he was chairman and CEO. main stakeholder. The former SolarCity operation has been a drag on Tesla, with panel installations falling down since it was acquired.
Defendant asked the Delaware Court of Chancery to dismiss the case before it leads to a March trial. Shareholder cases that survive a motion to dismiss often settle before litigation, which in this case may involve a payment to the shareholders of Musk as well as money from director's insurance.
Tesla rejected the charges in an email statement, saying they were "based on claims from plaintiff's attorneys looking for a payday, and are not representative of our shareholders who support our mission and ultimately voted for the acquisition." [19659006] The suit represents another legal headache for Musk, the high-profile entrepreneur who settled a lawsuit by US securities regulators last year about his use of Twitter and is being sued for defamation by a British diver who said Musk falsely labeled him a pedophile. Just last week, a Delaware judge ruled that Tesla must defend, under trial, Musk's $ 1 billion pay package.
According to the filing, Musk was informed at a SolarCity board meeting in October 2015 that SolarCity needed to raise up to $ 300 million and was in the process of reducing solar cell installation for the year. The company issued $ 113 million in convertible notes a month later, of which Musk bought $ 10 million.
In February 2016, the SolarCity management told the board that the cash balance was expected to fall below the amounts required for a key limit for several months of the year. A default on this credit line would trigger defaults on other debt instruments, the filing stated.
Despite the bad news, Musk proposed the acquisition of SolarCity to the Tesla board later that month after a family vacation in Lake Tahoe with his cousin, SolarCity CEO and founder Lyndon Rive. SolarCity did not disclose details of its liquidity problems to investors.
At a meeting of Tesla's Board of Directors on June 20, 2016, Musk suggested to board members an initial acquisition price of $ 28.50 per share for SolarCity – a 30% premium to the market price – although Tesla's financial adviser, Evercore, had recommended 25 to $ 27 per share.
The Board of Directors finally approved an exchange rate representing a share price of $ 26.50 to $ 28.50 per share, although the offer was later lowered before the agreement was terminated.
Tesla said that Musk's meetings with Rive, his involvement in valuation discussions and all other material information were accurately described to shareholders in public filings before the agreement was terminated.
When Tesla made the offer to SolarCity on June 21, Musk publicly declined the deal. But according to the filings, he held frequent meetings with Evercore and pressed investors into a series of phone calls to support the purchase.
"I couldn't be deprived of all the discussions … I needed to say my opinion, obviously," Musk said during questioning by the oath of attorneys for the defendant shareholders.
Meanwhile, Musk Rive assured that he would have "covered" for cash needs until the acquisition closed when SolarCity "went crazy close" to the liquidity packs, the documents said.
The companies said that SolarCity accepted the offer on August 1, 2016. The stock offer valued SolarCity at $ 25.37 per share, less than the original proposal, and in line with the Evercore proposal. Shareholders Approved the Agreement November 17 (Reporting by Nichola Groom; Editing by Tom Brown)
