- Tesla shareholders filed a lawsuit against the company in 2016, claiming that CEO Elon Musk urged the company to buy SolarCity to enrich himself. They say it was a breach of the trust duty.
- Last Thursday, PlainSite, an organization focused on transparency in the US judicial system, posted a bunch of deposits (including one from Musk) and documents included in the case. The Think Computer Foundation initially received the documents.
- Some documents show that SolarCity was faced with a liquidity crisis when Tesla bought it and that some members of the Tesla board had much to lose personally if the deal did not take place. The documents also show that the Tesla solar tile product, disclosed to the public just before its acquisition is approved by the board, does not work.
- An e-mail from Musk involved in the lawsuit indicates that he pressed it to go through the presentation of the solar panel to convince the board to approve the acquisition of SolarCity.
- "The latest feedback from big investors is very negative about SolarCity," Musk said in an email to Peter Rive, co-founder of SolarCity, on September 1
- Musk's attorneys say he does not actually control the process of purchasing SolarCity since it is not voted for the deal and that the shareholders who voted on the deal were fully informed of what was happening at the two companies.
- Tesla did not respond to numerous requests for comment on this story.
In 2016, the empire that Elon Musk built to conquer Earth and space was in danger, but Mu ck intervened with a potentially illegal plot to save everything and to lump Tesla shareholders with the account, shareholders allege in a lawsuit filed against Tesla,
The lawsuit, initially filed in 2016, alleges that Tesla's acquisition of SolarCity's 2016 – which charged Tesla with billions of dollars of debt and debt – is a breach of the trust duty by Tesla CEO Elon Musk and the company's board of directors, Plaintiffs also claim that Musk and other council members made all this to enrich and save SolarCity while hiding the company's desperate financial condition. They were major shareholders and SolarCity was assisted by cousin of Moscow's Lyndon Reeve.
Musk's lawyers argued that he did not actually control the process of purchasing SolarCity because he did not vote on the deal, and that the shareholders who voted on the deal were fully informed of what was happening at the two companies. Tesla did not respond to numerous requests for comment on the matter.
On Thursday, a bunch of lawsuits went public, including deposits with Musk, then Tesla CFO Jason Wheeler and more players in the deal. The data account also includes things like minutes from Tesla board meetings, internal emails and presentations that highlighted the bankers advising the deal on SolarCity issues and the potential for synergies between the two companies.
According to these documents, the merger that Musk called "non-brain" seems to be something else, but. No other company was bidding to buy SolarCity – which at the time was asked by cousin of Musk Lyndon Reeve – and according to internal emails, it was also trying to find financing for a $ 200 million bridge loan that was needed immediately .
"They claim other banks want to switch to the SolarCity Bridge," Bank of America's Reid Wood said in an internal email in July 2016, "but we have no visibility … the reality of the problem is magnified by Elon . "(Tesla announced its intention to make the deal with SolarCity in June).
That's why things look so bad for SolarCity: In order to maintain the terms of its revolver, the company had to have $ 116 million in cash at the end of the month each month. But back in September 2015, there were reports that the company was going through a monetary crisis, with its balance falling to $ 35 million in November, according to internal emails. At the same time, SolarCity had a ton of capital expenditures, most critically at its Buffalo plant, where it had to spend a certain amount or pay the state of New York over $ 600 million.
By July 2016, after the announcement of the deal, the situation seemed more desperate. In an email to an unnamed person on July 9, Rive described the company as "super low in cash" and said he was worried about the "domino effect" if the company didn't get the money it needed.
Musk was also very aware of the cash situation prior to the acquisition. In an email dated September 18, 2016, Musk sent a message to Brad Bus, the former chief financial officer at SolarCity, stating that one of the things SolarCity should do to convince investors to merge with Tesla is to decide Solar Company Liquidity Crisis
SolarCity's problems did not only concern Musk because he was a shareholder and member of the SolarCity board, but it mattered because, according to the lawsuit, the company's fate was tied to SpaceX , a piece of his empire.
Space X, a rocket company of Musk, gave $ 165 million to SolarCity in early 2015, according to SolarCity internal emails filed as part of the case, and it held 77% of SolarCity's bonds. In short, if SolarCity goes down, it can take SpaceX with it. Tesla did not respond to a request for comment about SolarCity's finances at the time.
However, none of SolarCity's problems had anything to do with Tesla's shareholders. Apart from Musk, his brother Kimball, and several board members holding SolarCity shares, Tesla shareholders only had to worry about making cars. That's why, inside Tesla, the board of directors and c-suite knew it could be a difficult battle to get shareholders to approve the deal. Board members were personally tasked with reaching out to big-time shareholders like Fidelity to manage them, according to the emails.
But that does not seem to work until the fall of 2016, according to documents included in the case. Big investors like T-Rowe Price still did not support the deal.
In an internal email dated September 14, 2016, Todd Maron, a former Tesla general counsel, described a conversation he was having with T-Rowe Price regarding their doubts about the deal.
"They (T-Rowe) have said what Tesla is trying to accomplish in the automotive space is very complicated and adding SolarCity to the mix raises the company's operational and financial risk profile, especially given SolarCity's financial challenges as a company," Maron in the email.
So Musk gave them and other questionable shareholders a reason to get on board.
At the end of October 2016, Musk hosted a major Hollywood TV show, unveiling a product that was still does not exist – Tesla solar tile
" last is feedback from major investors is very negative for SolarCity ", he said in an email to Peter Rive on September 16, 2016" We have to show them what it looks like integrated product. They just don't get it. It has to happen before the vote, so maybe the goal of October 28th is the joint sun roof and the unveiling of Powerwall 2. "
Tesla's Chief Technical Officer JB Straubel was also included in this email. Tesla did not respond to Business Insider's request for comment on its contents.
After seeing the solar panel, Tesla shareholders approved the deal in November.
Much to lose, much to gain
Inside SolarCity as early as autumn on 2015 there was confirmation that 2016 would not be nice with In the email to c-suite company Tanguy Serra, the then SolarCity president made it quite clear.
"Next year, we are facing a more commercial mix with Silveo [SolarCity’s manufacturing plant] – so there will be no such basis. better, "he writes.
This is part of the reason in June 2016, the time of announcing this deal, Wall Street scratched its head, trying to figure out how exactly it would bring Tesla no benefit.
"… we are trying to see a brand, customer, channel, product or technology interaction," JP Morgan analysts wrote at the time. "We acknowledge that easy access by the acquirer to the capital markets may provide a low cost of the equity option …. but we do not see any other cost synergy that was no longer available to SolarCity through close partnership."
included in a presentation Evercore gave to Tesla's board of directors in July.
The board was still not sold in part because there were still many questions about how much SolarCity would cost. According to emails between Evercore and Tesla bankers filed as part of the case, Evercore founder Roger Altman said Tesla was pricing too generously and in a July 2 email directly said: "Tesla shareholders may they don't like it. " Meanwhile, Tesla's board of directors wanted to see if there would be any other candidates for SolarCity. But there are none.
Until October 2016, however, the Tesla board sang a different tune. In an October presentation by Tesla to proxy companies involved in the case, he said the deal would create $ 150 million in direct cost savings within the first year of the acquisition.
Five Tesla board members had a clear financial interest in reaching this end-to-end deal, the case claims. Not only could they lose a lot if SolarCity passed, but they also had a lot to gain if it was saved with a premium (as it were), the suit claims.
From the filing cabinet:
In 2015 and 2016, Kimball Musk used its shares in SolarCity as collateral for its personal loans, according to its deposit. If SolarCity falls apart, it would be a problem for him. But he testifies that his personal loans have nothing to do with his support for the deal, so Tesla can acquire SolarCity.
The attorneys of the defendants contend, according to the submission, that personal problems such as this do not constitute any conflict of interest because the defendants are so rich.
Lifting the Roof
According to multiple depositions, the solar tile that Musk presented to wow Tesla shareholders was not really a working product when it was discovered. In Wheeler's statement, he was asked about it directly and something like this happened:
Question: So I get an idea of the time – I know you knew that [solar roof tile] was a future firstborn product at the time of its inclusion, Were you on it opinion prior to signing the merger agreement that …. there was no real modeling project.
A: Yes, I think that was what I thought before it was signed [the acquisition deal].
In his deposition, SolarCity's President of Global Sales Tobey Corey stated that the roof that Tesla revealed upon presentation was not connected to a network of any kind while presenting itself. He also said he could not remember whether Tesla had ever sold a roof.
"I don't remember selling any," he said, though he said he recalled that some tiles had been installed after the show.  "More than five," the lawyer asked, questioning him.
"Honestly I can't tell you," Corrie replied. "It wasn't much, but I remember hearing installations going on. I know Elon was installing the system … I believe there were others I don't remember the exact number."
Tesla did not respond to a request by Business Insider for comment on Corey's delay, how many solar tiles were sold or how many were installed after the presentation.
You can order version three from the Tesla Website if you like, but as Bethany MacLean reported in Vanity Fair last month, some people have done this before just to have their Tesla deposits, since their roofs never have materialized.
Last Friday, a day after the documents relating to the case became public, Tesla made a phone call announcing that it had developed version three of the product, which would work fine. The call, however, was easy on the details and was not a live event like the unveiling of the first solar tile. There is no Hollywood kit. Tesla did not respond to Business Insider's request for comment on whether the product is ready for use or not.