A 2016 lawsuit filed against Tesla Inc. accuses the company and CEO Elon Musk of concealing key facts from shareholders who approved the automaker's acquisition of SolarCity, now Tesla Energy Operations Inc., according to court documents published on legal research website PlainSite.
The plaintiffs in the lawsuit challenge Musk's decision to approve a merger with SolarCity and how Tesla stockholder support was solicited. Other lawsuits at the time threatened the deal. SolarCity, which Tesla acquired in a $2.61 billion all-stock deal, was co-founded by Musk's cousins, according to the documents.
"At trial, Plaintiffs will prove that SolarCity was not worth the price negotiated by Tesla’s conflicted fiduciaries and was insolvent at the time of the acquisition," the documents said.
The plaintiffs said in the court filing that Musk and others hid "a variety of troubling facts" to establish stockholder ratification.
"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," a Tesla spokesperson said in an emailed statement to S&P Global Market Intelligence. "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. Providing clean, renewable energy generation through solar has been a critical part of our mission ever since 2006, and our acquisition of SolarCity has enabled and continues to enable a significantly faster path to achieve our goals."
The lawsuit also noted that SolarCity was not profitable and incurred major losses and that Musk's space-exploration company, SpaceX, kept SolarCity afloat.
The plaintiffs accuse Musk of directing SpaceX to buy $90 million in SolarCity bonds in March 2015, $75 million in June 2015 and another $90 million in 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 lawsuit said.
Tesla shares were down 6.77% at $224.90 during midday trading on the Nasdaq.
