Five years ago, Elon Musk gushed to investors about Tesla’s acquisition of SolarCity, then the top U.S. solar panel installer. “I’m pretty optimistic about how it’s going to turn out. It’s pretty transformational,” he said on a Nov. 1, 2016, call with analysts. “It’s been extremely well-received at the consumer level,” said Musk of the estimated $2.2 billion deal. During the same call, he batted down concerns about SolarCity’s faltering financial health. “There are quite a few naysayers on the financial front, some of the big hedge funds, whatnot,” said the billionaire, “I see no chance of SolarCity going bankrupt. Zero.”
Musk heads to Delaware’s Court of Chancery on July 12 to defend the deal. He’s the sole remaining defendant in a case brought by shareholders alleging that the SolarCity purchase was a bailout of a troubled company founded by his cousins in which he was the biggest investor and chairman. The suit had also accused Tesla’s board of lax corporate governance. Board members, led by chair Robyn Denholm, settled for $60 million last year, admitting no fault. But Musk opted to defend the purchase. A loss in the case could cost him more than $2 billion, the full cost of the acquisition, which would be one of the largest judgments ever against an individual corporate executive. While companies such as Bank of America and BP have faced damage awards in the billions for their roles in events such as the mortgage-backed security collapse and disastrous Deepwater Horizon oil spill, individual executives are seldom solely liable for such large amounts.
It’s the latest legal twist for the 50-year-old centibillionaire founder of the world’s top electric vehicle brand and rocket maker SpaceX. Musk enjoys a cult-like fan base and 58 million Twitter followers, but his track record defending himself over comments that landed him in tricky legal straits is mixed. In 2018, he lost his role as Tesla chairman and had to pay a $20 million fine to the SEC over claims he made about taking the carmaker private that turned out to be bogus. A later case brought by the SEC over Twitter comments Musk made about Tesla production goals ended with no additional punishment for the executive. In December 2019 he won a defamation case brought against him by Vernon Unsworth, an advisor to Thai rescuers aiding a youth soccer team trapped in a cave whom Musk called “pedo guy.”