In November, 2016 when SolarCity was bought by Tesla, its founder Musk had billed the deal to be a perfect match for green energy as it combined an electric car company which was doing well and a solar rooftop panel provider which at that time was the largest in the nation. The match would be creating a one stop shop for the customers who wanted clean energy.
However it was not revealed during the time that SolarCity was in a lot of financial trouble.
Only weeks after the merger took place the auditor of SolarCity, Ernst & Young had concluded that the company is lacking cash which isn’t sufficient to meet the obligations it has as a stand-alone company.
Therefore it can be said that SolarCity was close to being insolvent when the shareholders had voted for the payment of $2.6 billion for the acquiring of the solar panel maker and agree to take on the debts which rescued it from the probable bankruptcy.
These filings are a part of the suit which has been filed by a shareholder called Ellen Prasinos which is on behalf of all the shareholders of Tesla against Elon Musk and the board of directors of Tesla having alleged that they had overpaid for the acquiring of SolarCity, ignoring their conflicts of interest and not disclosed the facts that pointed towards facts that were troublesome and essential for a rational analysis of the deal that is proposed.
It is also being alleged that SolarCity had hidden the information from its auditors Ernst & Young about a couple of payments due to the lenders, this information should be used for determining the financial condition of SolarCity.