A Conflicted Kimbal Musk Was Facing SolarCity Margin Calls Before Tesla's Bailout, Deposition Shows
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A Conflicted Kimbal Musk Was Facing SolarCity Margin Calls Before Tesla's Bailout, Deposition Shows

More and more details to Tesla's bailout of SolarCity are becoming clear. And the more details we get, the uglier things look. 

The latest addition to the story was yesterday, when one well known Tesla skeptic took the time to lay out, in wonderful detail, the financial pressure that SolarCity's tanking stock price was putting on the company's directors - specifically, Elon's brother Kimbal Musk - who faced multiple margin calls prior to the merger. 

Using Kimbal Musk's recently released deposition from the SolarCity lawsuit, the short seller known only as @TeslaCharts on Twitter, reconstructed the days leading up to Elon Musk pitching the SolarCity acquisition to the Tesla board. They detail a panicked Kimbal Musk, cursing about Tesla and blowing out his SpaceX shares to cover his SolarCity margin call - all while maintaining that he had zero conflict of interest in Tesla's eventual bailout of SolarCity.

@TeslaCharts starts by layout out the context, reminding readers that Kimbal Musk was a large shareholder in SolarCity, as well as a board member of both Tesla and SpaceX at the time. 

He then makes note of Kimbal's reasoning for not recusing himself regarding matters involving SolarCity. The only person who didn't seem to think Kimbal had a conflict of interest was Kimbal himself. 

He continues down this line of logic, noting that despite owning 141,541 shares of SolarCity, Kimbal still did not think he had a conflict of interest because he was representing "the best interests of the shareholders of Tesla".

From there, @TeslaCharts starts to lay out a timeline. First, October 20, 2015, when Kimbal is facing a margin call due to SolarCity for the first time. 

He then also lays out that many members of the Tesla and SolarCity boards are also on the Board of Directors of Kimbal's company, the Kitchen. 

In fact, when Kimbal is seeking financing for his own company, SolarCity's CEO tells him that he can't participate because he is also facing his own margin calls. SolarCity is "seeing its ass", CEO Lyndon Rive tells Kimbal. Of course, "seeing its ass" doesn't appear in any SolarCity public filings around that time - this was information just for Kimbal. 

Then Kimbal winds up in a back and forth with the questioning attorney about the definition of a margin call, which he clearly doesn't understand. The deposition shows that Kimbal used his Tesla line of credit to cover his SolarCity line - symbolic, of sorts, isn't it?

Kimbal then faces a margin call on October 29, 2015 and uses his Tesla stock to again cover it. 

Kimbal is then rebuffed by Elon after he hits Elon up for a loan to try and bail himself out of his margin call. "You know that I don't actually have cash, right?" Elon says to his brother. 

So Kimbal shifts his attention to potentially selling some of his SpaceX stock to cover the call. It is also noted that Elon Musk had a LTV of just 5% for his SpaceX shares at Goldman.

By February 8, 2016, all hell is breaking loose. SolarCity's stock is still falling and Kimbal is forced to offer some SpaceX stock at $110. 

On February 9, 2016, there's a clear sense of urgency when SolarCity dips to $18 per share. Kimbal yanks the offer on his SpaceX stock from $110 to $95 over the course of just one day. 

Kimbal then, frustrated, e-mails the CFO of his company, the Kitchen. "Motherfucker," he says after describing Tesla's 50% fall. 

So the next day, his brother Elon goes online and pulls forward the date for Model 3 reservations, announcing that more information on the unveil would be coming soon. Tesla stock moves higher and "margin loan pressure undoubtedly eases," @TeslaCharts says.

And just two weeks later, Elon calls a meeting to pitch the idea of acquiring SolarCity. To nobody's surprise, the Board doesn't even discuss Kimbal Musk's potential conflict of interest. 

The thread ends with @TeslaCharts saying what everyone else is thinking:

"The only thing surprising about this giant self-dealing Ponzi scheme is just how egregious it all is."

The thread, in its entirety, can be read here. @TeslaCharts also appeared on a podcast on Sunday to lay out his thoughts both on Tesla's recent quarterly results, and on the company's claims about its "Version 3.0" of its solar roof tiles. 

Recall, we noted yesterday that despite the company's "headline" Q3 numbers, its U.S. sales actually plunged 39% in the quarter. 

Tyler Durden Wed, 10/30/2019 - 23:30
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