Shareholder Lawsuit: Elon Musk Testifies In SolarCity Acquisition Case
According to a report from CNBC, Elon Musk recently testified in a shareholder lawsuit related to Tesla’s $2.6 billion acquisition of SolarCity. Notably, Mr. Musk, the CEO of Tesla, also previously served as the Chairman of SolarCity. Some shareholders alleged that Mr. Musk—along with some other Tesla board members—personally gained from the company’s acquisition of SolarCity. Here, our West Palm Beach shareholder dispute lawyers provide a more detailed account of the lawsuit.
Background: SolarCity Faced Some Significant Financial Challenges
SolarCity was founded back in 2006. The Fremont, CA based company marketed, sold, and installed solar panels to both residential and commercial customers. Notably, the company was founded by Peter Rive and Lyndon Rive—cousins of Tesla CEO Elon Musk. As noted previously, Mr. Musk was also the Chairman of SolarCity prior to the Tesla acquisition. SolarCity faced some significant financial challenges.
Tesla Acquired SolarCity for $2.6 Billion—Not All Shareholders Were Happy
In 2016, the company cut its workforce by approximately 20 percent, laying out nearly 2,000 employees. In August of 2016, Tesla announced its proposed acquisition of SolarCity at a cost of $2.6 billion, in an all-stock transaction. Almost immediately, some Tesla shareholders raised complaints. They argued that Tesla dramatically overpaid for SolarCity and that Mr. Musk and other members of the board had a conflict of interest.
A Shareholder Derivative Claim Was Filed Against Elon Musk and the Board of Directors
A group of Tesla shareholders decided to file a derivative lawsuit on behalf of the company. In a shareholder derivative lawsuit, shareholders are filing a claim on behalf of the corporation itself, typically against a corporate officer, director, or other key insider. Essentially, the shareholders are arguing that the corporation (Tesla) suffered harm because of the improper actions of its leadership. Notably, the board of directors has already settled this claim outside of court on undisclosed terms.
Refusal to Settle: Elon Musk Defends Shareholder Lawsuit in Court
Tesla CEO Elon Musk testified in a Delaware court because he refused to settle the shareholder derivative lawsuit. The key question at stake in the trial is whether or not Mr. Musk acted in the best interests of Tesla (and its shareholders) in the acquisition of SolarCity or whether he put his personal financial interests ahead of the company. As reported by CNBC, Mr. Musk declared that he did not gain personally from the transaction. Further, he states that he did not direct the Board of Tesla to make the SolarCity acquisition. The shareholder derivative trial is expected to last for around two weeks.
Call Our South Florida Shareholder Rights Lawyers for Immediate Legal Help
At Pike & Lustig, LLP, our Florida business litigation attorneys have extensive experience handling shareholder disputes. If you have any questions about your legal rights, we are more than ready to get started on your case. Give us a call now for a confidential consultation with a top-rated lawyer. From our offices in West Palm Beach, Miami, and Palm Beach Gardens, our law firm handles shareholder disputes all around the region.