SolarCity was insolvent when Tesla paid $2.6B to buy it, lawsuit says | Hacker News Reader

SolarCity was insolvent when Tesla paid $2.6B to buy it, lawsuit says

arstechnica.com

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This is short term thinking. Tesla's ultimate goal is to provide the complete package of electric car, battery and solar generation for homes and businesses. Buying Solar City obviously ticked the missing box of solar.

That was the plan and good one. It probably hasn't gone as well so far as Musk expected at the time but the game isn't over yet. There is strong demand for the Tesla solar tiles when they finally ship in quantity and at that time this buyout will look much better.

Even if everything you say is true (and the idea that Solar City had any kind of workable tech with the solar tiles at the time of the acquisition is very flimsy), the fact is that if Solar City was insolvent, and Elon Musk knew that before the purchase was consummated, then he violated his fiduciary duty to Tesla shareholders to secure the best deal. Solar City could have been picked up for a song and its liabilities (which are currently a huge anchor on Tesla's balance sheet) restructured.

The argument is that Tesla overpaid, not that they shouldn’t have purchased.

If SolarCity was insolvent then Tesla should have paid less. This would be better for Tesla employees and shareholders.

So you're saying it's kind of like how HP overpaid for Autonomy? :) Valuations are tricky at the best of times never mind in tech. It's easy to have an opinion. It's a lot harder to prove it in court.

Partly. But I think the interest is that it’s self-dealing. If you are buying and selling to yourself then it’s easier to price an asset. So that’s nothing like HP overpaying for Autonomy.

In this case it's a bit easier to prove in court because there is documented evidence of Solar City's auditor signaling the need to use "going concern" language, and top executives at Solar City discussing the dire financial straits that any further revenue declines would put the company in. Top executives who reported, ultimately, to Elon Musk, who also had access to all the same financials they were looking at. They're also unable to plead ignorance because Tesla's CFO at the time, Jason Wheeler, made a very frank presentation to the Tesla Board laying out all the reasons Solar City was a ticking financial timebomb, and this is also coming out in the lawsuit.

Does anyone else get the feeling these shareholders are shooting themselves in the foot by wasting Elon's time with this lawsuit? Or is it that this is fueled by a competitor? Sure it's not great if Elon used his power/influence to push the Solar city transaction, but Elon has created and will continue to create so much value for shareholders, surely it's in everyone's best interest to let him focus on building better products instead of distracting him with this noise?

He bought a falling company from himself and his cousins for almost 3 billion, plus the company had 3 billion in debt. The deal resulted in him getting half a billion more in tsla stock.

Tesla's market cap in June 2016 was 35 billion. It's 43 billion now. That's not that much value created. The S&P went up almost 50 percent in that time.

It's all besides the point anyway, since many shareholders sold their shares because of this fraud. They don't care what he's doing now, they just want their money back.

It's in everyone's best interest to have checks on self dealing CEOs. If people can't trust public companies to behave, the whole system breaks down.

Isn’t that what the board is for?

The Tesla Directors are paid many multiples of the average at other comparable companies so that they will not question or push back against Elon Musk, and they include many personal friends and even his brother, who has no qualifications whatsoever to sit on the Board of a major automaker.

Presumably there's a substantial contingent of shareholders who disagree with you and see Musk as a liability to the value of their TSLA stock, and want him out before it's too late.

One can be long 1 share and simultaneously be short 1000 the same stock, and claim the right to sue the company or its management as a "shareholder".

Worst, the SEC consider short sellers to be investors and defend them as if they were actual shareholders.

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