[dhaivatpandya]

How is conflict of interest generally handled in this sort of situation?

Given that Elon Musk is personally major investor in SolarCity and Tesla is a publicly traded company with obligations to its shareholders, would Elon be removed or limited in his ability to control negotiations with SolarCity? Even though it seems like an acquisition of SolarCity would fit within Tesla's overarching strategy, price negotiation could probably be affected by Elon's interests within SolarCity.

[adventured]

No, not necessarily (re Elon being limited or removed). In fact, that's very unlikely.

For example, Berkshire Hathaway has occasionally run into conflicts of interest over its long history. They've usually handled them by being as transparent and open about the details as possible. In one famous acquisition, they intentionally over-paid for the company they were buying that they already held a large stake in. They told the SEC during a questioning about it, that they over-paid by a bit because they wanted their new shareholders to be happy, long-term partners. The SEC regulators apparently struggled to understand the premise, per Buffett's biography.

I would suggest in Elon's case, that his best bet is to be extremely open about all details of the acquisition, including how the price was arrived at. Tesla should pay a bit more than what would otherwise be normal. The more transparent the better. There's nothing to inherently restricts Elon's role here, regulation wise, but he does need to be a bit careful so as to avoid setting up an easy lawsuit.

[AJ007]

There are a lot of other comments here about margin calls and short sellers, but ignoring all of that, if Tesla had some financial interest in SolarCity, and Elon wanted to buy SolarCity, it may be a conflict of interest if Elon Musk personally attempted to acquire SolarCity instead.

During the most recent Berkshire shareholders meeting Warren mentioned that he tries to never personally buy anything that Berkshire owns or would have interest in owning (and he does personally own financial assets outside of Berkshire.) It is a pretty clear gulf for him and fairly easy since Berkshire operates as a holding company.

The whole view of conflicts of interest can not be fully be evaluated without untangling the exact details and facts of both Elon's ownership interests and Tesla's.

I own a tiny amount of both companies but I don't know enough concrete details about SolarCity. Conceivably if Tesla is moving heavily in to the battery/energy storage business SolarCity could have assets that are much more valuable to that business. I don't know if there is valuable IP, or maybe even the current SolarCity customer base is worth a lot as battery pack customers. Presumably a Tesla battery pack/powerpack doesn't make a lot of sense if the customer doesn't have solar power? If there is an overlap between customers and SolarCity is in bad financial shape, then the acquisition could make sense.

There is a lot of guessing here, and its probably something that may be really obvious either way only years from now.