'Orchestrated the bailout': Elon Musk heads to court in $2 bn Tesla-SolarCity case

Tesla’s  (TSLA) CEO Elon Musk on Friday was accused by the shareholders of orchestrating the bailout on his solar panel maker company SolarCity as the billionaire entrepreneur entered the two-week trial on acquisition in the Court of Chancery in Wilmington, Delaware, US. Shareholders pitted SpaceX CEO Musk against pension funds, while the asset managers alleged that the billionaire used “his control of Tesla” as he rescued his investments in 2016 out of the solar panel maker SolarCity when the company was on the verge of bankruptcy.

The union pension funds and asset managers for SolarCity now want founder Elon Musk to ‘repay’ electric car manufacturer company Tesla the total cost of the $2.6 billion deal as well as disgorge the profits on his SolarCity stock, according to several reports. 

If the legal team wins against the Tesla CEO, is would be one of the largest corporate judgments to date. The hearing will decide whether Elon Musk, who owns about 22% of Tesla, had to resort to investors about Tesla’s acquisition of SolarCity using his influence or position of power. In a call with analysts on November 1, 2016, as cited by Forbes, Musk had stated that he was “pretty optimistic” about how the SolarCity was going to turn out, labelling his deal with stakeholders as ‘transformational’.

Furthermore, Tesla CEO elaborated on the performance of the firm saying that it was extremely well received at the consumer level despite SolarCity’s faltering financial health. He insisted that there was “no chance” for the company to go bankrupt despite that there were a few naysayers on the financial front, some of the big hedge funds. 

Musk's control on Tesla despite 'minority stakes' 

On July 12, Musk will head to the Delaware court to defend the case brought by shareholders against his control on the battery-powered car company despite minority stakes. The acquisition case has been going on for four years now after Musk in 2016 acquired solar panel installer and financier SolarCity for $2.6 billion and the assumption of $3 billion in debt, as per the reports.

Musk and his cousins served as CEO and CTO at SolarCity founded in 2006. Investors were skeptical about the acquisition as the project was already plunging and there were increased layoffs within the company. With Tesla’s June announcement, the electric car manufacturer’s stock plummeted by more than 10 percent. In this case, it is being alleged that Elon Musk was “well aware” of SolarCity’s financial troubles at the time that he struck the deal with investors, who are also arguing that Musk managed to convince the Tesla board to approve the purchase. Musk is accused of plotting a bailout for SolarCity rather than an acquisition.