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TSLA Investors Demand Musk Repay $13B for SolarCity Deal

In an ongoing lawsuit regarding the infamous purchase of SolarCity in 2016 by electric car manufacturer Tesla Inc. (TSLA), the company’s investors have urged the judge to order TSLA CEO Elon Musk to repay $13 billion back to the company.

Meanwhile, shares of TSLA closed down 1.8% at $1,030.51 on January 18.

Musk Must Repay $13B

Since acquiring SolarCity in 2016, TSLA investors have shown their contempt for the deal and called it a “rescue mission” for the failing company, as Musk was one of the top shareholders of SolarCity at the time.

Union pension funds and asset managers have alleged that Musk compelled Tesla’s Board to buy the company. Investors have demanded that Musk must repay the stock received in the transaction, which would be worth around $13 billion at its current price.

In his defense, Musk and his attorneys have said that it was only a strategic deal to create a vertically integrated company. SolarCity is in the business of solar roof panels. Musk even called the demand a “windfall” for plaintiffs and stated that it would be one of the biggest awards in a comparable lawsuit.

Meanwhile, the shareholders’ attorney Lee Rudy said, “It would be a windfall for Elon Musk if he got to keep shares, he never should have gotten in the first place.”

Musk’s attorney even claims that Tesla is in its leading position today because of the efforts and direction of its CEO. Vanessa Lavely, an attorney for Musk, said, “Without Elon Musk, Tesla might not exist let alone have a $1 trillion value… That doesn’t make him a controller. That makes him a highly effective CEO.”

Vice-Chancellor Joseph Slights of Delaware’s Court of Chancery said he will issue the ruling in about three months.

Analysts’ View

Tesla earnings for Q4FY21 is scheduled for January 26. Ahead of the earnings, Credit Suisse analyst Dan Levy lifted the price target to $1,025 (implies shares are almost fully valued) from $830, while reiterating a Hold rating.

For Q4, Levy expects Tesla to report earnings of $2.81 per share while consensus is pegged at $2.25 per share.

Levy is encouraged by the opening of two manufacturing facilities at Austin and Berlin next week, which he believes will double the EV maker’s production. The analyst estimates Tesla will deliver 1.5 million EVs in 2022, a 60% year-over-year growth.

Overall, the stock has a Moderate Buy consensus rating based on 16 Buys, 9 Holds, and 6 Sells. The average Tesla price target of $1,057.39 implies 2.6% upside potential to current levels.

Blogger Opinions

TipRanks data shows that financial blogger opinions are 73% Bullish on TSLA, marginally better than the sector average of 72%.

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