In 2016, Elon Musk was the chief executive officer, chairman of the board, chief product officer, co-founder and largest shareholder of Tesla Inc. He was also the co-founder, chairman and largest shareholder of SolarCity Corp. He decided that Tesla, which makes electric cars, should acquire SolarCity, which installs home solar panels. So he “persistently” raised the idea with Tesla’s board, which ignored him the first few times but eventually agreed that Tesla should buy SolarCity. Terms of a deal were negotiated, with Musk more or less recusing himself from the negotiations. Eventually an all-stock acquisition was announced and presented to Tesla’s and SolarCity’s shareholders; a majority of the independent (i.e., not Musk) shareholders approved the deal, and it closed in November 2016.
There is an obvious conflict of interest when the CEO of a big public company wants that company to acquire another company that he owns, particularly where the target was maybe not in the greatest financial shape. (“By any measure, SolarCity was in the midst of a liquidity crisis” at the time, said a judge. “I don’t think SolarCity was financially troubled,” said Musk.) And so some Tesla shareholders are suing Musk in a court in Delaware (where Tesla, like most U.S. public companies, is incorporated), arguing that Tesla should not have bought SolarCity, that it overpaid, and that Musk should pay it back.
