Elon Musk will go to trial on July 12 for a lawsuit where he could lose up to $2 billion from his personal wealth. Tesla shareholders sued Musk, saying that the $2.6 billion acquisition of SolarCity in 2016 was a conflict of interest as it enriched him and his family more than it did for the automotive company.
Tesla's acquisition of SolarCity is an old but ongoing issue among many of its shareholders. On the commercial aspect, Tesla bought SolarCity as its next step to self-sustainable energy. The company advertised "Solar Roofs" to be the best solution for home electricity.
However, another argument shareholders present is that Tesla money was used to settle for SolarCity's liquidity crisis. Allegedly, Musk used the automotive company's money to save the business investment that his cousins Lyndon Rive and Peter Rive founded in SolarCity.
Tesla's Controversial SolarCity Acquisition Begins
YouTuber Logically Answered gave an overview of the SolarCity history and overall performance. SolarCity first came into business by leasing out solar panels to its customers. However, around 2015, after a rapid improvement of solar energy technology (which lead to its lower price) and loss of interest from its investors, the company entered a huge debt.
In 2016, Musk first proposed to combine Tesla and SolarCity. After a long internal debate, Musk got his way as the electric car company bought out SolarCity for $2.8 billion. SolarCity stocks immediately rose, while Tesla stocks dropped by 10 percent. Lastly, in 2017, Lydon Rive decided to leave Tesla, saying that he wants to find a new startup.
In conclusion, Tesla paid a huge sum over to SolarCity, both as an investment and bailout money. Tesla also expanded its market to sell out Solar Roof and Powerwalls. However, whether Tesla has recovered from the $2.6 billion acquisition fee from SolarCity remains undetermined.
Elon Musk Could Lose Up to $2 Billion If He Loses
CNBC reported that Elon Musk is scheduled to face trial starting July 12 at Wilmington, Delaware. His fate would be determined by the Chancery Court's judge, Vice-Chancellor Joseph Slights III.
According to the report, this court meeting will discuss if Musk acted in Tesla shareholders' best interest in the SolarCity acquisition and if he told the Tesla shareholders everything they deserved to know.
Musk and his attorneys are expected to argue that the SolarCity deal did not harm the shareholders' investment. Instead, Tesla shares have skyrocketed from $43.92 on June 21, 2016 to a closing price of $656.95 on July 9, 2016.
Whether this argument proves valid will be seen later in court.
Musk has faced many different lawsuits in these last few years. Back in 2018, he also had a conflict against the Securities and Exchange Commission (SEC) that caused him to pay $20 million. This current charge, however, could cost Elon Musk more than $2 billion if he loses.