A judge has ruled in favour of Tesla chief executive Elon Musk, rejecting a case which claimed he unjustly enriched himself when the company acquired SolarCity in a US$2.6 billion deal in 2016.
Delaware Chancery Court judge Joseph Slights III ruled in favour of the defence in a ruling issued yesterday, concluding that there had been no breaches of fiduciary duty by Musk and that the acquisition was approved fairly.
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Aggrieved shareholders had claimed that the decision to acquire solar installation business SolarCity, which was at the time led by Musk’s cousin Lyndon Rive, whose brother Peter co-founded the business, did not represent value for shareholders. They further alleged that Musk had breached fiduciary duties in pursuing the deal at a “patently unfair price” and for that reason, among others, sought damages of up to US$13 billion.
In his decision, Judge Slights said the process undertaken by Tesla in pursuing the acquisition was “far from perfect” and that Musk himself was more involved than a conflicted fiduciary should have been. Other conflicts at the board level were not “completely neutralised”, Slights added.
Nevertheless, the ruling also made clear that there had been “persuasive evidence” that the acquisition was fair given that minority shareholders had waved the move through.
“Indeed, the Acquisition marked a vital step forward for a company that had for years made clear to the market and its stockholders that it intended to expand from an electric car manufacturer to an alternative energy company,” Judge Slights’ ruling stated.
The full ruling can be read here.
Yesterday’s verdict follows Judge Slights’ previous ruling in October last year that dismissed direct claims against Tesla and brings to a conclusion a case that first arose back in September 2016, two months before the acquisition was concluded.