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SolarCity was insolvent when Tesla paid $2.6B to buy it, lawsuit says

58 points by close04 7y ago

nelsonic 7y ago
Does anyone else get the feeling these shareholders are shooting themselves in the foot by wasting Elon's time with this lawsuit? Or is it that this is fueled by a competitor? Sure it's not great if Elon used his power/influence to push the Solar city transaction, but Elon has created and will continue to create so much value for shareholders, surely it's in everyone's best interest to let him focus on building better products instead of distracting him with this noise?
- thefj 7y ago
  He bought a falling company from himself and his cousins for almost 3 billion, plus the company had 3 billion in debt. The deal resulted in him getting half a billion more in tsla stock. Tesla's market cap in June 2016 was 35 billion. It's 43 billion now. That's not that much value created. The S&P went up almost 50 percent in that time. It's all besides the point anyway, since many shareholders sold their shares because of this fraud. They don't care what he's doing now, they just want their money back. It's in everyone's best interest to have checks on self dealing CEOs. If people can't trust public companies to behave, the whole system breaks down.
  - jmpman 7y ago
    Isn’t that what the board is for?
    - AndrewBissell 7y ago
      The Tesla Directors are paid many multiples of the average at other comparable companies so that they will not question or push back against Elon Musk, and they include many personal friends and even his brother, who has no qualifications whatsoever to sit on the Board of a major automaker.
- newnewpdro 7y ago
  Presumably there's a substantial contingent of shareholders who disagree with you and see Musk as a liability to the value of their TSLA stock, and want him out before it's too late.
- rcMgD2BwE72F 7y ago
  One can be long 1 share and simultaneously be short 1000 the same stock, and claim the right to sue the company or its management as a "shareholder". Worst, the SEC consider short sellers to be investors and defend them as if they were actual shareholders.
sunstone 7y ago
This is short term thinking. Tesla's ultimate goal is to provide the complete package of electric car, battery and solar generation for homes and businesses. Buying Solar City obviously ticked the missing box of solar. That was the plan and good one. It probably hasn't gone as well so far as Musk expected at the time but the game isn't over yet. There is strong demand for the Tesla solar tiles when they finally ship in quantity and at that time this buyout will look much better.
- AndrewBissell 7y ago
  Even if everything you say is true (and the idea that Solar City had any kind of workable tech with the solar tiles at the time of the acquisition is very flimsy), the fact is that if Solar City was insolvent, and Elon Musk knew that before the purchase was consummated, then he violated his fiduciary duty to Tesla shareholders to secure the best deal. Solar City could have been picked up for a song and its liabilities (which are currently a huge anchor on Tesla's balance sheet) restructured.
- prepend 7y ago
  The argument is that Tesla overpaid, not that they shouldn’t have purchased. If SolarCity was insolvent then Tesla should have paid less. This would be better for Tesla employees and shareholders.
  - sunstone 7y ago
    So you're saying it's kind of like how HP overpaid for Autonomy? :) Valuations are tricky at the best of times never mind in tech. It's easy to have an opinion. It's a lot harder to prove it in court.
    - prepend 7y ago
      Partly. But I think the interest is that it’s self-dealing. If you are buying and selling to yourself then it’s easier to price an asset. So that’s nothing like HP overpaying for Autonomy.
    - 7y ago

58 points by close04 7y ago

Does anyone else get the feeling these shareholders are shooting themselves in the foot by wasting Elon's time with this lawsuit? Or is it that this is fueled by a competitor? Sure it's not great if Elon used his power/influence to push the Solar city transaction, but Elon has created and will continue to create so much value for shareholders, surely it's in everyone's best interest to let him focus on building better products instead of distracting him with this noise?

thefj 7y ago
He bought a falling company from himself and his cousins for almost 3 billion, plus the company had 3 billion in debt. The deal resulted in him getting half a billion more in tsla stock. Tesla's market cap in June 2016 was 35 billion. It's 43 billion now. That's not that much value created. The S&P went up almost 50 percent in that time. It's all besides the point anyway, since many shareholders sold their shares because of this fraud. They don't care what he's doing now, they just want their money back. It's in everyone's best interest to have checks on self dealing CEOs. If people can't trust public companies to behave, the whole system breaks down.
- jmpman 7y ago
  Isn’t that what the board is for?
  - AndrewBissell 7y ago
    The Tesla Directors are paid many multiples of the average at other comparable companies so that they will not question or push back against Elon Musk, and they include many personal friends and even his brother, who has no qualifications whatsoever to sit on the Board of a major automaker.
newnewpdro 7y ago
Presumably there's a substantial contingent of shareholders who disagree with you and see Musk as a liability to the value of their TSLA stock, and want him out before it's too late.
rcMgD2BwE72F 7y ago
One can be long 1 share and simultaneously be short 1000 the same stock, and claim the right to sue the company or its management as a "shareholder". Worst, the SEC consider short sellers to be investors and defend them as if they were actual shareholders.

sunstone 7y ago

This is short term thinking. Tesla's ultimate goal is to provide the complete package of electric car, battery and solar generation for homes and businesses. Buying Solar City obviously ticked the missing box of solar. That was the plan and good one. It probably hasn't gone as well so far as Musk expected at the time but the game isn't over yet. There is strong demand for the Tesla solar tiles when they finally ship in quantity and at that time this buyout will look much better.

AndrewBissell 7y ago
Even if everything you say is true (and the idea that Solar City had any kind of workable tech with the solar tiles at the time of the acquisition is very flimsy), the fact is that if Solar City was insolvent, and Elon Musk knew that before the purchase was consummated, then he violated his fiduciary duty to Tesla shareholders to secure the best deal. Solar City could have been picked up for a song and its liabilities (which are currently a huge anchor on Tesla's balance sheet) restructured.
prepend 7y ago
The argument is that Tesla overpaid, not that they shouldn’t have purchased. If SolarCity was insolvent then Tesla should have paid less. This would be better for Tesla employees and shareholders.
- sunstone 7y ago
  So you're saying it's kind of like how HP overpaid for Autonomy? :) Valuations are tricky at the best of times never mind in tech. It's easy to have an opinion. It's a lot harder to prove it in court.
  - prepend 7y ago
    Partly. But I think the interest is that it’s self-dealing. If you are buying and selling to yourself then it’s easier to price an asset. So that’s nothing like HP overpaying for Autonomy.
  - 7y ago