Musk divorce case could hang over Tesla for up to a year

Tesla Motors CEO Elon Musk may have won an initial ruling in the divorce dispute with his now-separated wife, novelist Justine Musk, but the case is far from over, Mrs. Musk’s attorney, Marshall Zolla, told VentureBeat.

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We heard yesterday from a source close to Mr. Musk, that the trial court judge had ruled  against Mrs. Musk. Zolla contended that the judge has already certified his ruling for immediate appeal, and attached no other conditions.

Before the appeal can proceed, the trial court judge that favored Mr. Musk’s position will have to issue a formal statement. After that, the appeals process could last for up to a year, Zolla says.

“The case is certainly not over,” he says.

In the meantime, protective orders preventing community assets from being touched, a routine process in such cases, will be kept in place through the resolution of the case, however long it takes. It hasn’t been determined precisely how Mr. Musk’s interests in Tesla Motors, SpaceX and SolarCity are affected, but Zolla previously told VentureBeat that Mrs. Musk is seeking some portion of his stakes in those companies.

Former Tesla marketing executive Darryl Siry, now CEO of startup NewsBasis, has estimated Tesla’s value after an initial public offering at between $1 billion and $1.5 billion in his blog.

If an appellate court rules that his stakes in Tesla should be divided with his former wife, there could be major ramifications for company strategy, especially given Tesla’s pending IPO. If Mr. Musk’s control is diluted, his board of directors may decide to take the company’s strategy in a different direction.

In any case, it would seem Mrs. Musk’s claims to Tesla would no doubt need to be stapled to the revised S-1 filing for the public sale of shares as another risk factor for investors to consider. (A company spokesman said Tesla had no plans to disclose the matter in its S-1 filing.) Analysts predict the IPO to take place sometime in the third or fourth quarter this year — so in all likelihood it will precede the resolution of the divorce.

[Update: Justine Musk has authored a blog post in which she states that she is seeking less than 10 percent of the former couple’s assets — not 50 percent, as a divorcing spouse might be entitled to under some interpretations of California’s community-property laws. This makes it unlikely that any divorce settlement would jeopardize Tesla Motors’ $465 million loan from the U.S. Department of Energy, or dilute Mr. Musk’s controlling interest in the company. In fact, according to Mrs. Musk, in a comment on her blog post, she proposed a settlement to her former husband that would allow him to retain all voting rights in the company. That said, the outcomes of trials are unpredictable, and Mr. Musk’s assets remain under the court’s protective orders, both of which would seem to be facts worth disclosing to potential Tesla investors.]

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