Tesla CEO Elon Musk has been deposed in a class-action lawsuit relating to Tesla Inc’s $2.6 billion acquisition of SolarCity in 2016. As part of the deposition, Musk claimed he could not be recused from discussions about acquiring SolarCity, which he was both chairman and the largest shareholder of, because “I needed to voice my opinion, obviously.”
Bloomberg reports that Tesla CEO Elon Musk was deposed recently as part of a class-action lawsuit from shareholders who claim that they were misled during Tesla’s $2.6 billion acquisition of SolarCity in 2016. Musk stated that he was involved in some discussion about the acquisition but refused himself from a board vote which approved the initial offer at the time.
Musk was questioned about his role under oath by lawyers for pension and investment funds that are claiming Musk duped investors into buying the solar-energy company that was founded by his own cousins where he was also the chairman and largest shareholder. According to a filing last week in Delaware Chancery court, Musk stated during his deposition: “I could not be recused from all discussions. I needed to voice my opinion, obviously.”
The shareholders allege in the three-year-old lawsuit that SolarCity was essentially insolvent when the firms announced plans to merge in June 2016 and wasn’t worth the price that twas negotiated by Tesla’s “conflicted fiduciaries.” The shareholders say that they can prove this at trial but are requesting in the meantime that a judge rule that the Tesla has the burden to prove that the deal was fair and can’t rely on arguments that stockholders approved the transaction. This is a higher standard that is applied when company directors are acting in their own self interest.
Tesla’s board first discussed the SolarCity acquisition after Musk proposed to buy the firm at an emergency board meeting in February 2016. At the time of this proposal, Musk was SolarCity’s chairman and largest shareholder while his cousin Lyndon Rive was the CEO of the firm. Raising equity or acquiring additional debt was not an option for SolarCity at the time. “If [banks] think you’re running low — dangerously low on cash, then they don’t want to give you cash,” Musk said. “But if they think you’ve got plenty of cash, they want to give you cash. It’s ironic.”
The lawyers representing Tesla’s board stated that an independent financial adviser, Evercore, evaluated the potential acquisition of four solar firms including SolarCity, Vivint Solar Inc., Sunrun Inc., and SunPower Corp., but found that “SolarCity is the most attractive asset for Tesla in the solar market.” Further, the board’s lawyers stressed that Robyn Denholm who was an independent director at the time and now Tesla’s chairman, spent hundreds of hours on due diligence and took an active role in discussing the deal with investors. Denholm has previously been described as a close friend of Elon Musk.