In a significant development, a Delaware judge ruled that Tesla Inc’s Chief Executive Officer, CEO, Elon Musk did not unjustly enrich himself when he guided the electric vehicle maker to acquire SolarCity Corp in 2016, when Musk was its chairman and the largest shareholder.
Tesla’s shareholders had accused Musk of coercing Tesla’s board into buying SolarCity, to rescue his investment, since it was struggling financially at that time and had sought up to $13 billion in damages.
The ruling comes at a time when Musk acquired Twitter Inc for $44 billion, and with another court ruling that oversight on Musk’s Tesla tweets should continue.
“The preponderance of the evidence reveals that Tesla paid a fair price — SolarCity was, at a minimum, worth what Tesla paid for it, and the acquisition otherwise was highly beneficial to Tesla,” said the opinion by Vice Chancellor Joseph Slights of Delaware’s Court of Chancery.
A lawyer for Tesla’s shareholders said he was evaluating potential next steps.
“The case is about loyalty. The court’s decision acknowledges that Elon Musk was conflicted and there were flaws in the process,” said Randall Baron, an attorney for the plaintiffs.
Neither Musk nor Tesla immediately responded to requests for comments.
According to Slights, Musk was more involved than he should have been, but a fair price for SolarCity outweighed claims the deal unjustly enriched Musk.
Union pension funds and asset managers alleged that Musk commandeered Tesla’s negotiations for SolarCity while publicly claiming to be “fully recused.”
Slights also noted that on several occasions Musk was involved in board discussions of the deal, but also observed that there were several instances when the board stood up to Musk and declined to follow his wishes, such as the timing of the deal.
In 2016, the all-stock deal was valued at $2.6 billion.
Since then Tesla’s stock price has soared, inflating the value of what Musk received from the SolarCity purchase and in turn the damages sought by the plaintiffs.