/Angry shareholders accused Elon Musk of using Tesla and SpaceX to bail out his cousins solar company for $2.6 billion

Angry shareholders accused Elon Musk of using Tesla and SpaceX to bail out his cousins solar company for $2.6 billion

  • Newly unsealed documents show eight Tesla shareholders have accused Elon Musk of buying solar panel company SolarCity at an inflated price in 2016 to bail the company out.
  • SolarCity was founded by Elon Musk’s cousins, Lyndon and Peter Rive, and Tesla acquired the company for more than $2 billion in 2016.
  • The suit also claims that Musk used SpaceX to prop up SolarCity prior to the acquisition.
  • Visit Business Insider’s homepage for more stories.

Court documents unsealed on Monday show angry Tesla shareholders filed a lawsuit against the company over its acquisition of solar panel company SolarCity in 2016.

The opening brief for the lawsuit was filed in 2016 and had previously been available but heavily redacted, CNBC reports. The eight listed plaintiffs gained class-action status in April of this year, and mostly comprise pension funds.

They allege that Tesla acquired SolarCity — which was cofounded by Musk’s cousins Lyndon and Peter Rive — for an inflated price.

Read more: Tesla is now facing its most dangerous adversary yet, and it could be proof that buying SolarCity was a huge blunder

The suit claims that SolarCity was by 2015 barrelling towards a “major liquidity crisis,” and that Musk used SpaceX to buy a total of $255 million in SolarCity bonds from March 2015 to March 2016.

“These bond purchases violated SpaceX’s own internal policy, and SolarCity was the only public company in which SpaceX made any investments,” the suit says.

The suit further alleges that following a meeting between Musk and Lyndon Rive at a family vacation at Lake Tahoe in 2016, Musk convened an “emergency meeting” of the Tesla board and told his CFO Jason Wheeler to pitch acquiring SolarCity.

Lyndon Rive.JPG

SolarCity cofounder and former CEO Lyndon Rive.
REUTERS/Rashid Umar Abbasi

The filing claims that immediately after the acquisition closed at roughly $2.6 billion, SolarCity’s auditors declared the company insolvent.

Musk isn’t the only Tesla executive named in the suit, as it claims the intertwining of Tesla, SpaceX, and Solarcity led to conflicts of fiduciary interest for Tesla’s board of directors — which includes Musk’s brother, Kimbal Musk.

Tesla and SpaceX were not immediately available for comment when contacted by Business Insider, but a Tesla spokesperson told CNBC: “These allegations are based on the claims of plaintiff’s lawyers looking for a payday, and are not representative of our shareholders who support our mission and ultimately voted in favor of the acquisition.

“The accusations made in the plaintiff’s brief are false and misleading, as Tesla and SolarCity published all material information in its proxy and other public filings for all shareholders to consider before deciding on the transaction.”

The unsealed filings come at an awkward moment for Tesla, as it is already being sued by Walmart over its solar panels business after panels caught fire at seven different Walmart stores.

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