Court case surrounding Tesla’s US$2.6bn SolarCity takeover begins

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The court case alleges that Musk broke fiduciary duties during Tesla’s acquisition of SolarCity. Image: Flickr/Heisenberg Media.

Elon Musk and Tesla’s court case regarding its acquisition of solar installer SolarCity has got underway in the US this week, with shareholders of the energy and automotive company alleging that fiduciary duties were breached when the deal was agreed.

Tesla acquired SolarCity in an all-stock deal valued at US$2.6 billion in 2016. The deal was agreed by the management of Tesla and SolarCity, the latter of which at the time included Tesla CEO Musk’s cousins Peter and Lyndon Rive, who founded SolarCity alongside Musk.

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The deal, first announced in June 2016, was subject to months of scrutiny but won shareholder approval in November 2016. Two months prior, a civil action was filed by shareholders of Tesla, claiming they were defrauded when the acquisition was agreed.

In August last year Tesla’s board of directors struck a US$60 million settlement deal with some shareholders, approved by Judge Slights of the Court of Chancery of the State of Delaware. This separate case, also presided over by Judge Slights, applies to Musk’s role specifically in the acquisition.

The case was filed with the Delaware District Court in 2017 and was due to be heard in March of last year but was postponed as a result of the COVID-19 pandemic.

It alleges that SolarCity was in financial difficulty at the time of the deal, with Tesla’s acquisition of the solar installation business tantamount to a bailout. It also alleges that Musk and other members of SolarCity’s management benefitted financially from the transaction, and that post-acquisition, SolarCity failed to deliver on profit expectations.

Since 2016 Tesla’s solar installation division has lost its market-leading position to Sunrun and, last year, recorded its lowest-ever quarter of installations in the second quarter. While installations have since rebounded, aided by a lowest-price promise and overhauled solar-storage strategy, it has also been beset by a troubled rollout of its flagship Solar Roof product.

It was subsequently revealed that the head of Tesla’s energy division RJ Johnson had left the business, with some news sources claiming Musk had removed him over failures within the Solar Roof programme.

The suit is seeking for the full cost of the acquisition – US$2.6 billion – to be reimbursed. Should Judge Slights deem Musk’s conduct to have breached fiduciary duties then any financial compensation will be at his discretion.

The case is expected to last for two weeks.

25 November 2025
Warsaw, Poland
Large Scale Solar Central and Eastern Europe continues to be the place to leverage a network that has been made over more than 10 years, to build critical partnerships to develop solar projects throughout the region.

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