On Thursday, Elon Musk secured a favorable verdict against the Tesla Inc. shareholders who accused the CEO of manipulating the company’s board into purchasing the unprofitable rooftop solar panel firm SolarCity. According to an article by Harri Weber for TechCrunch, the court opined that Musk’s ties to SolarCity made him “more involved in the process than a conflicted fiduciary should be,” but that the executive did not impede the board’s due diligence process and moreover, that Tesla paid a fair price for SolarCity.
Shareholders confronted Musk about his role in Tesla’s purchase of the struggling solar company founded and led by his cousins in a 2016 Delaware Chancery Court lawsuit, as reported by CNBC in an article by Lora Kolodny and Jessica Bursztynsky. They reportedly sought up to $13 billion in damages over the $2.6 billion purchase, which the plaintiffs said was a “bailout” orchestrated by Musk, who also funded SolarCity and served as the chairman of its board.
Specifically, they argued that Musk was able to push the deal across the finish line by misrepresenting facts about SolarCity’s financial viability and by puppeteering Tesla’s board, CNBC reported. The case proceeded through trial where Musk testified, explaining that the acquisition was part of his vision to advance renewable energy and that SolarCity could have raised funds even if Tesla had not bought it.
This week, Vice Chancellor Joseph Slights concluded that although the executive was more involved than he should have been, the allegations were insufficient to demonstrate that Musk had been unjustly enriched. The court reiterated that Tesla paid a fair price for SolarCity and that since the acquisition, Tesla’s share price has substantially increased.
The shareholders, who were not required to pay Musk’s legal fees, have the opportunity to appeal.
They are represented by Grant & Eisenhofer P.A., Kessler Topaz Meltzer & Check LLP, and Robbins Geller Rudman & Dowd LLP.
Musk is represented by Ross Aronstam & Moritz LLP and Cravath Swaine & Moore LLP.
