Tesla’s SolarCity acquisition for US$2.6 billion in 2016 was “entirely fair” to shareholders, as ruled by the top court in Delaware, Bloomberg Law reports.
The rule in favor of Tesla Elon Musk saved him from a possible multibillion-dollar loss. According to the ruling, the billionaire did not force America’s leading automaker to overpay for the SolarCity acquisition in 2016.
Ruling
The Delaware Supreme Court ruled on June 5 that the parties’ deal negotiations “were conducted at arm’s-length, in good faith, with the advice of independent financial and legal advisors, led by an indisputably independent director, and, thus, constituted a fair process that led to a fair price.”
Following the news, Tesla stock surged by 1.5%. It increased further by 1.2% to $220.30 at 2:15 PM in New York.
Adverse influence allegations
Tesla co-founder Elon Musk was allegedly “too involved” in the acquisition for it to be fair to Tesla shareholders, according to the investors who filed a lawsuit in 2016.
The report noted that Tesla CEO Musk at the time served as SolarCity’s chairman and top shareholder, which his own cousins founded and managed.
However, he did criticize the business tycoon for failing to withdraw himself from the transaction properly.
“Elon was more involved in the process than a conflicted fiduciary should be. And conflicts among other Tesla Board members were not completely neutralized. With that said, the Tesla Board meaningfully vetted the Acquisition, and Elon did not stand in its way.”
Vice-Chancellor Joseph R. Slights, the judge on the case, said in 2022
Interestingly, CEO Musk was the only one to contest the investors’ allegations in court. In contrast, his fellow directors on the board agreed to a $60 million settlement.
The American billionaire was spared from having to turn over as much as $13 billion in Tesla shares he acquired as part of the takeover thanks to Slights’ judgment from a year ago. It was also his final significant decision before quitting his position.
The lawsuit would have been a significant loss even to his personal wealth. According to the Bloomberg Billionaires Index, the Tesla CEO is currently the richest person in the world, with a net worth of $202.1 billion.
“We are convinced that the record supports the conclusion that the acquisition was entirely fair.
The trial court’s opinion is replete with factual findings and credibility determinations, and those determinations have not been challenged and decidedly weigh in favor of Musk.”
Delaware Supreme Court
Still, Slights was criticized by the appellate panel for not adequately elaborating on how he arrived at his decision, noting that both the parties and the court “would have been greatly aided by a more fulsome discussion of how the trial court weighed the valuation evidence.”
See Also:
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- Tesla will unveil “Master Plan Part 3” at “Investor Day” on March 1
- Tesla reports the deployment of its 500,000 solar installations
- Elon Musk Says the World Has a Bigger Problem than Global Warming
Nonetheless, it is now clear that Elon Musk did not influence the Tesla-SolarCity negotiations, ending a year-long lawsuit.
