- Tesla shareholders filed suit against the company in 2016 because CEO Elon Musk urged the company to buy SolarCity to enrich itself. They say it is a violation of loyalty.
- Last Thursday, PlainSite, an organization focused on transparency in the US judiciary, published a series of rejections (including one from Musk) and documents contained in the lawsuit. The Think Computer Foundation originally received the documents.
- Some documents show that SolarCity faced a liquidity crisis when Tesla bought it, and that some Tesla board members had a lot to lose personally if the deal did not materialize. The documents also show that the Tesla solar roof tile product, which was presented to the public shortly before the Executive Board approved the acquisition, did not work.
- An email from Musk filed in the lawsuit indicates that he has pushed up the solar tile presentation to convince the board of approval of the SolarCity acquisition.
- Musk e-mailed Peter Rive, co-founder of SolarCity, on September 1
- Musk's lawyers have argued that he did not really control the SolarCity purchase process because he did not vote on the deal, and Shareholders who voted on the deal were fully informed about what was going on in the two companies.
- Tesla did not respond to multiple requests for comments on this story.
In 2016, the empire Elon Musk built to conquer Earth and space was in jeopardy, but Musk entered into a potentially illegal conspiracy to save everything and keep the Tesla shareholders in mind, argue the shareholders in a lawsuit against Tesla.
The lawsuit, originally filed in 2016, alleges that Tesla's acquisition of SolarCity in 2016 – which saddled Tsla's billions of dollars in debt and liabilities – was a violation of allegiance on the part of Tesla's CEO, Elon Musk, and Tesla Board of Directors of the company. The plaintiffs also allege that Musk and other board members have done all this to enrich themselves and save SolarCity while concealing their desperate financial situation. They were major shareholders, and SolarCity was led by Musk's cousin Lyndon Rive.
Musk lawyers have argued that he did not really control the SolarCity buying process because he did not vote on the deal. and that the shareholders who voted on the deal were fully informed about the events in the two companies. Tesla did not respond to multiple requests for comments on this matter.
On Thursday, a number of petitions were filed, including statements with Musk, Tesla's former CFO Jason Wheeler and other players. The data dump also includes Tesla Board of Directors minutes, internal emails and presentations in which the bankers who recommended the deal reported problems with SolarCity and the potential for synergies between the two companies.
The fusion that Musk called "no-brainer" seemed anything but to be. No other company offered to buy SolarCity, which was run by Musk's cousin Lyndon Rive at the time. According to internal emails, it also struggled to find funding for a $ 200 million bridging loan, which it needed immediately.
"They claim other banks wanted to join the SolarCity Bridge," said Ray Wood of Bank of America in an internal e-mail sent in July 2016, "but we have no visibility … the reality of the problem dawns on Elon . "(Tesla announced his intention to finalize SolarCity in June.)
For SolarCity, it looked so bad for the following reason: To maintain conditions for the revolver, the company had to spend over $ 116 million Cash is available at the end of the month every month. But already in September 2015, there was an awareness that the company was in a cash crisis. According to internal emails, the balance fell in November to only $ 35 million. At the same time, SolarCity spent a lot of capital, especially at its Buffalo plant, which had to spend a certain amount or pay more than $ 600 million to the state of New York.
In July 2016, after the deal was announced, the situation seemed more desperate. In an e-mail to an unnamed person on July 9, Rive described the company as "super cheap" and said he was worried about the "domino effect" if the company did not get the money it needed.
Also Musk was very aware of the cash situation before the acquisition. In an e-mail sent on September 18, 2016, Musk sent a message to SolarCity's former chief financial officer, Brad Buss, explaining that one of SolarCity's actions is to convince investors to merge with Tesla to solve the problem Liquidity crisis of the solar company.
SolarCity's problems were not only important to Musk because he was a shareholder and board member of SolarCity, but also because the company's fate, according to the lawsuit, was linked to SpaceX, part of its empire.
Musk rocket company Space X had awarded $ 165 million to SolarCity at the start of 2015, holding 77% of SolarCity bonds, according to internal SolarCity emails filed in the lawsuit. In short, if SolarCity goes down, it could bring SpaceX. Tesla did not respond to a request for an opinion on the financial position of SolarCity at this time.
None of SolarCity's problems had anything to do with the Tesla shareholders. With the exception of Musk, his brother Kimball, and some of the directors who owned SolarCity shares, Tesla's shareholders only had to worry about making cars. As a result, the board of directors and the C-Suite within Tesla knew that getting the shareholders to vote could be a tough struggle. Board members were mandated to personally address individuals from large shareholders, such as Fidelity, to influence them by e-mail.
However, this did not seem to work until autumn 2016, as evidenced by the documents in the complaint. Big investors like T-Rowe Price still do not support the deal.
In an internal email dated September 14, 2016, Todes Maron, Tesla's former general counsel, described a conversation with T-Rowe Price about her doubts about the deal.
"They (T-Rowe) said what Tesla's automotive goals are very complex and the addition of SolarCity to the mix enhances the company's operational and financial risk profile, especially given SolarCity's financial challenges as a company", said Maron in the email.
Musk gave them and other dubious shareholders a reason to go aboard.
In late October 2016, Musk hosted a massive show on a Hollywood TV, revealing a product that did not yet exist – Tesla's Solar Roof Tile.
"Recent feedback from major investors on SolarCity is very negative," he said on September 16, 2016 in an email to Peter Rive. "We need to show them what the integrated product looks like, they just do not get it." Must be done before the vote, so on 28 October a common solar roof and the unveiling of Powerwall 2 should be sought.
Tesla's then technical director JB Straubel was also included in this email, and Tesla did not respond to Business Insider's request to comment on the content.
After the Tesla shareholders approved the deal in November.
Lots to lose, lots to gain.
Inside of SolarCity as Back in the fall of 2015, it was acknowledged that 2016 would not hurt the company's business model, in an email to C-Suite Tanguy Serra of The SolarCity president made that quite clear.
"Next year, we're dealing with Silveo [SolarCity’s manufacturing plant]a more commercial mix – so it will not be better on a similar basis," he wrote.  For that reason, Wall Street scratched its head at the time of this deal's announcement in June 2016, trying to understand exactly how Tesla would benefit.
"… we strive to see each other" Synergies between brand, customer, sales channel, product or technology ", wrote the analysts of JP Morgan at that time. "We recognize that the acquirer's easy access to the capital markets can result in low capital costs, but we see no further cost synergies that SolarCity did not already have through its close partnership."
This quote was included in a presentation that Evercore presented to Tesla's Board of Directors in July.
The board was not sold at that time, because there were many questions about how much SolarCity would cost. According to emails from Evercore bankers and Tesla filed in the lawsuit, Evercore founder Roger Altman said Tesla paid too generous prizes, and in an e-mail dated July 2, it said: "Tesla shareholders could not like that." In the meantime, Tesla's board of directors wanted to see if there were more bidders for SolarCity. But there was none.
Until October 2016, Tesla's board sang a different tune. In a Tesla presentation to litigated proxies in October, Tesla claimed that the agreement would generate $ 150 million in direct cost savings synergies in the first year following the acquisition.
Five Tesla Board Members Have a Clear Financial Interest When it comes to bringing this deal past the finish line, the lawsuit claims. Not only would they have lost a lot if SolarCity had gone down but also had much to gain if it had been saved for a premium (as it was), the lawsuit said.
From the files:
In 2015 and 2016, Kimball Musk used his SolarCity shares after his deposit as collateral for his personal loans. If SolarCity went broke, that would be a problem for him. However, he testified that his personal loans had nothing to do with his support for Tesla's acquisition of SolarCity.
The defendants' lawyers argued that personal problems like these were not a conflict of any interest because the defendants are so rich.
Raise the Roof
According to several statements, the solar roof tile that Musk presented to enthrall the shareholders of Tesla was not actually a working product at the time of its disclosure. In Wheeler's Deposition, he was directly asked about it, and it went something like this:
Q: So I have a sense of timing – I know you knew that [solar roof tile] was a future one at the time it was introduced was a burgeoning product. Did you believe this before the merger agreement was signed that … there was no real project to model.
A: Yes, I think, before it was signed [the acquisition deal]that was what I thought.
In his statement, Tobey Corey, SolarCity's President Global Sales, said Tesla's roof revealed in his presentation was not connected to a grid during the presentation. He also said he could not remember if Tesla had ever sold a roof.
"I can not remember selling one," he said, though he remembered that after the presentation some roof tiles were installed.  "More than five," the lawyer asked, questioning him.
"I honestly could not tell you," Corey replied. "It was not much, but I remember hearing about installations, I know that Elon installed his system … I think there were others I can not quite remember."
Tesla did not respond to Business Insider's request to deposit Corey, the number of solar tiles sold, or the number of bricks installed since the presentation.
You can order version 3 of Tesla's website if you want, but as Bethanny McLean reported at Vanity Fair last month, some people have already done so just to have their deposits with Tesla, as their roofs never came up ,
Last Friday, a day after the documents were posted This lawsuit went public, Tesla made a phone call announcing that a version three of the product was being developed that would work well. However, the call went into details and it was not a live event like the unveiling of the first solar roof tile. No Hollywood set. Tesla did not respond to Business Insider's request to comment on whether the product was ready for use or not.