The purchase of SolarCity by Tesla was the single dumbest thing Elon Musk did and it has dire consequences for Tesla the car company. Shareholders definitely have a great chance to sue Musk because he did not do this in the best interest of his shareholders, it's in the best interest of his cousin. Co-mingling all parts of his companies (SpaceX buying SolarCity Bonds) is a huge red flag that reeks of corporate malfeasance. He should have let SolarCity die, it would have come back as a stronger company once the initial investors were wiped out.
> The purchase of SolarCity by Tesla was the single dumbest thing Elon Musk did
Why was it a bad move for Elon Musk?
Elon Musk owned many SolarCity shares (in fact, Elon Musk was the chairman of SolarCity). If SolarCity would go bankrupt, Elon Musk would have lost a lot of money and power. Elon Musk saved SolarCity to save his own skin and money. Its not really that hard to imagine.
Now Tesla shareholders, who overwhelmingly voted for the merger, made a big mistake. But Tesla shareholders own the company, they are allowed to make whatever decisions they want.
Its definitely a sketchy move, but Elon Musk did it correctly. Elon Musk recused his voted, and left it up to shareholder vote. Tesla shareholders only have themselves to blame for this move.
EDIT: Even if you voted "no" and were overridden by all of your fellow shareholders, you had plenty of time to sell your Tesla shares to avoid this disaster. Tesla bought SolarCity back in 2016. Plenty of time to sell if you were keeping up with the news.
> Now Tesla shareholders, who overwhelmingly voted for the merger, made a big mistake. But Tesla shareholders own the company, they are allowed to make whatever decisions they want.
They voted for the merger based on Musk's claim that SolarCity had a good financial position and that they were releasing a revolutionary solar shingle product. Both of those were wrong.
Note: the financial positioning of SolarCity was obvious to anyone who could read a 10k. SolarCity never made a profit, and it spent tons of money chasing imaginary products (similar to a lot of other Musk-based properties). 10k documents exist for a reason. https://www.sec.gov/Archives/edgar/data/1408356/000156459017...
In 2016, SolarCity lost a full, solid, $Billion. The Tesla investors who voted for SolarCity / Tesla merger has no excuse on this part: all information was public, and no fraud has been detected in any of these numbers (yet).
> and that they were releasing a revolutionary solar shingle product
That one... I'll blame Musk for for sure. But investors really should have done their own proper leg-work and analyzed SolarCity's financial position on their own.
I'd love to see Uber's projections on what fare chances to do the demand curve. How much would they have to raise fares (accounting for decreased demand) to break even? If it's <5%, they're actually in a pretty good spot.
I wish I were kidding. But that's what the data says. Page 5 of the above link, Revenue: $6,265 and Net (6,262) if you want to ctrl-F things.
Uber spent $6 Billion more this half-year on Cost-of-Sales, R&D, and Administrative costs (compared to the 1H 2018).
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Operational income / Operational Margins are negative as well. Sooo... yeah... somewhere around 100% price increases across the board for Uber to break even.
Realistically, Uber will only become profitable if they cut back on marketing (aka: giving incentives to drivers), raise rates, and cut back on their R&D spending (all this self-driving car nonsense... Uber isn't rich enough to fund such a project).
As you say, investors should do their research but, I don't think that absolves Musk from making false or misleading statements.
If someone claims to be a Nigerian prince who just needs a few hundred dollars to give away their fortune, the potential customers/marks should certainly do their research and can easily learn that the offer is a scam, but the scammer is still in the wrong both legally and ethically.
>They voted for the merger based on Musk's claim that SolarCity had a good financial position and that they were releasing a revolutionary solar shingle product. Both of those were wrong.
Well, if the arguments at the time were good enough to convince them, sucks to be them. What are they gonna do?
Unless they were given tampered numbers or false factual information, Musk could oversell SolarCity prospects six ways from Sunday and they can't do anything about it.
> Unless they were given tampered numbers or false factual information, Musk could oversell SolarCity prospects six ways from Sunday and they can't do anything about it.
That would be true if Musk had owned SolarCity but not been CEO of Tesla: puffery short of actual fraud would be fine. As Tesla CEO, though, Musk has a fiduciary duty to Tesla shareholders, which means his (enforceable, legal) obligation is greater than just avoiding outright fraud.
> Well, if the arguments at the time were good enough to convince them, sucks to be them. What are they gonna do?
If the arguments and timelines were knowingly dishonest, then that's fraud. Hence the lawsuit.
> Unless they were given tampered numbers or false factual information, Musk could oversell SolarCity prospects six ways from Sunday and they can't do anything about it.
If you release a fake product on stage and announce timelines you know there is no possibility of meeting, then yeah, there are a lot of legal ramifications to that. Especially given a case where there are so many personal financial entanglements.
The lawsuit alleges a lot more. For instance,that Musk was aware of and didn't make known the fact the the SEC was looking at Solar City's liquidity position, and that the whole Solar Shingle reveal was a fake to sway the shareholder vote,since the product doesn't exist,two years on.
Yes, imagine if Elon Musk announced a technology that could materially move his share price at strategically important points knowing that it was just vapor ware. That would be really bad, but fortunately we know he doesn't do that because we're all driving fully autonomous Teslas right now.
No need to look at "self-driving" as proof. Solar City itself came with a lie that Elon was pushing: Solar Shingles.
Not only did Solar City fail to make Solar Shingles under the Tesla banner... Elon eradicated their contracts with Home Depot, fully destroying the future of SolarCity.
It should be no surprise to anyone that SolarCity is no longer the top solar company in the USA, but has fallen further and further behind. SolarCity, as a company, has been milked and discarded.
Each solar shingle turned out to use a traditional connector underneath and not a high tech backplane. Each connector increases the odds of a connector fire, and every single solar shingle has one.
Doing it with traditional connectors was a big surprise that revealed the whole thing to be a charade.
Don't even get me started on his brother (kimbal) and his multi-millionaire dollar salary to be a board member. He has zero experience in manufacturing or automobiles. Blows my mind they have allowed this go unchecked for so long.
Don't get me wrong, there are definitely some good things that happen via Tesla but the amount of shady deals done out in the open is mind blowing.
It is mind blowing. Kimbal has zero relevant experience in this specific industry and he has a 6million take home comp for it. In comparison a company like GM I want to say their average is below 500k but don't quote me, it has been a while since I looked...I actually think it was closer to 300k. And this for people with very relevant industry experience.
I don't get it. Seems like a conflict of interest to me.
Not just his cousins (I doubt Musk actually cares about them), but himself personally. He personally held a bunch of SC bonds. Tesla shareholders footed the bill to bail out Musk himself and get him out of those terrible bonds.
> Shareholders definitely have a great chance to sue Musk because he did not do this in the best interest of his shareholders, it's in the best interest of his cousin.
That lawsuit already exists and is still in litigation.
My personal theory about all of this is that it feels like someone went "we want to do X in 2025" and that the three musk companies were launched separately to achieve those goals because the complexity of arguing them together would not have been conductive of fundraising.
This is going to seem super nit-picky but SpaceX was and is still a privately owned company. If the board was aware of the decision to purchase these bonds then the act was completely above board.
There are lots of things we tell our selves about the legalities of how companies should be run. But most of those mythologies are based on the regulation of publicly traded companies. Privately traded companies can and do play these types of financial shell games constantly.
Sadly I don't feel like there is much recourse for Tesla shareholders here. Even if you could prove some sort of far ranging conspiracy, there was an up down vote on the merger. Additionally the merger it self was a stock swap and not a cash acquisition. Calling the merger a mistake is fair but my sense when you look at the positions held by musk and others I think that is unlikely a broader fraud happened here. Musk owns 1/3rd of Tesla and because Tesla is publicly traded (unlike spaceX) this 1/3rd ownership stake represents most of Musk's financial liquidity. Based on the 2016 market Cap of Tesla (somewhere between 20 and 60 billion) it seems highly unlikely that Musk would encourage a merger just to gain the additional 800 or so million in Tesla stock he was given for his solar city stock.
I'm so tired of this "best interest of shareholders" thing. When you invest in a company you should be investing in its mission. Tesla's mission is clearly not to make the most money, it is to improve applications of renewable energy. Every time I hear a company is going public, this is all I can think about.
> it is to improve applications of renewable energy.
Then they should have left SolarCity to die (it's not like there aren't other vendors), and focus on making great electric cars and maybe dabbling in the home-battery business.
Now SolarCity is an albatros around Tesla's neck and we may yet see it take them both down.
Following your suggestion would be terrible for Tesla investors. Elon is demonstrating quite profoundly that he does not allow things to die. That is probably the main thing keeping TSLA at a $40b market cap with upside potential.
Using his concept of "first principles" Solar City isn't a long term viable business. Residential solar only makes sense as a sort of a green washing stepping stone to grid solar. I'm glad we did it and got the public excited about green energy, but solar panels should be installed in fields except in very exceptional cases.
