There was a lot of interesting news worth covering on Monday. In addition to the aftermath of the Virgin Galactic space flight and subsequent stock offering, the other major development yesterday had to do with billionaire Elon Musk. The Tesla CEO had defended himself before a judge in regards to the now controversial SolarCity deal. Many Musk critics have looked at the 2016 deal with particular contempt, arguing that it only served to bail out Musk’s failing business at the expense of shareholders.
Musk defended himself in court against the allegations, saying that he didn’t act improperly regarding the negotiation process. During 2016, Musk was the chairman of both Tesla and SolarCity, and both of which were largely unprofitable at the time. Given his position, Musk was able to merge the two together in a $2.1 billion deal. Many critics have argued that Musk only did this to prevent his own company from going bankrupt in the first place.
In this particular case, the main plaintiffs included various pension funds that owned Tesla stock at the time, who argued that the deal was just a massive scheme to bail SolarCity out at the expense of ordinary shareholders.
“I don’t think SolarCity was financially troubled,” said Musk while in court. “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 also commented that he “rather hates” being the head of Tesla, saying that it was, and remains an incredibly stressful job.
Musk also defended the claims made against him by saying that he owned only 22% of Tesla at the time. As a minority shareholders, the remaining shareholders also approved of the deal as well. The billionaire’s lawyers also argued that SolarCity was worth more than what Tesla initially paid for it back in 2016.
At the moment, the case largely rests on whether the presiding judge, Joseph Slights III, will find that Musk did or did not have full control over the deal. Should he decide that Musk’s decision was secondary to that of other shareholders, it’s likely that the entire case will fall apart for the plaintiffs. However, should the case rule against Mr. Musk, it’s likely that he will have to pay back the billions for the SolarCity transaction back to Tesla from his own pocket.
Overall, shareholders seemed happy with Musk’s defense of the entire situation. Shares of Tesla were up around 4.4% in response to the development.
Tesla Company Profile
Founded in 2003 and based in Palo Alto, California, Tesla is a vertically integrated sustainable energy company that also aims to transition the world to electric mobility by making electric vehicles. It sells solar panels and solar roofs for energy generation plus batteries for stationary storage for residential and commercial properties including utilities. The Tesla Roadster debuted in 2008, Model S in 2012, Model X in 2015, Model 3 in 2017, and Model Y in 2020. Global deliveries in 2019 were 367,656 units. Tesla went public in 2010 and employs about 50,000 people. – Warrior Trading News