Elon Musk speaks at SolarCity's Inside Energy Summit in New York. Rashid Umar Abbasi | Reuters

Newly unsealed court documents show why a number of large Tesla investors, including some pension funds, believe its $2.6 billion acquisition of SolarCity in 2016 never should have happened. The documents are an opening brief in a shareholders' lawsuit against Tesla over the acquisition, but were previously heavily redacted. Legal transparency advocates PlainSite published a fuller version of the documents on Monday. Shareholders are accusing Tesla of improperly valuing the SolarCity deal, providing flawed analysis and misleading investors, among other things. The lawsuit, originally filed in 2016, is one of many facing Tesla and CEO Elon Musk, including a lawsuit from Walmart over solar installations that caught fire on the rooftops of some stores, at least two wrongful death lawsuits filed after drivers died while using Autopilot, and a defamation lawsuit against Musk from cave rescue hero Vernon Unsworth after the CEO called him a pedophile on Twitter and in e-mails to a reporter. Tesla said in a statement to CNBC, "These allegations are based on the claims of plaintiff's lawyers looking for a payday, and are not representative of our shareholders who support our mission and ultimately voted in favor of the acquisition." "The accusations made in the plaintiff's brief are false and misleading, as Tesla and SolarCity published all material information in its proxy and other public filings for all shareholders to consider before deciding on the transaction," the company said. "Providing clean, renewable energy generation through solar has been a critical part of our mission ever since 2006, and our acquisition of SolarCity has enabled and continues to enable a significantly faster path to achieve our goals."

The Musk 'pyramid' of companies

The newly unredacted court documents claim to show the tangled financial and personal relationships between several Musk investments: Tesla and SpaceX, where Musk is CEO, and SolarCity, where he was the largest shareholder and chairman with his first cousins in the executive suite. The documents claim that "Prior to the Acquisition, Musk described Tesla, SolarCity, and SpaceX as a 'pyramid' atop which he sat; it was 'important that there not be some sort of house of cards that crumbles if one element of the pyramid . . . falters.'" Notably, Musk had previously invested SpaceX money in SolarCity, and important aspects of that deal were hidden from auditors Ernst & Young before Tesla acquired SolarCity in 2016, the shareholders say. Specifically, the brief says SpaceX had poured around $165 million into the solar installers as non-recourse bonds, and SolarCity failed to disclose to E&Y how quickly they would have to make two substantial payments related to those bonds back to SpaceX. Shareholders say that even though Musk claims he recused himself where it was proper to do so, he was never really divorced from the deal-making process. He and his first cousin, Lyndon Rive, the co-founder and former CEO of SolarCity, spent time hatching out a plan to save the solar company from a liquidity crisis while on vacation in Lake Tahoe in early 2016, the filings say. Soon thereafter, Tesla's then-CFO Jason Wheeler drafted a proposal for the Tesla board of directors to do the deal. The filing says: "The Board did not reject Musk's proposal, as represented in the Proxy. Instead, the Board 'authorized management to gather additional details and to further explore and analyze' a SolarCity acquisition." Just after Tesla closed the $2.6 billion SolarCity deal, E&Y said that the solar company was insolvent, the filing claims. In addition, the brief claims that a majority of Tesla board members had financial interests on both sides at the time of the deal and wanted to see SolarCity bailed out rather than bankrupted in order to protect their own reputations, and their bets on other companies where Musk was and is still CEO.