On April 27th, a Delaware judge ruled in favor of Musk, who was being slammed with a $13 billion lawsuit for fiduciary damages related to Tesla’s acquisition of SolarCity.
The suit, filed in 2017, stated that Elon Musk had unjustly enriched himself when he directed Tesla in 2016 to acquire SolarCity Corp for $2.6 billion, where Musk was chairman and the greatest financier. When the acquisition went through, Musk sat on the SolarCity and Tesla boards.
Union pension funds and asset managers stated that Musk expropriated Tesla’s settlements for SolarCity while openly declaring to be “completely recused.”
In the 132-page judgment, Vice Chancellor Joseph Slights III stated the rate Tesla spent for SolarCity was reasonable and kept in mind that Musk did not breach his fiduciary job to Tesla financiers.
“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 Slights.
Slights mentioned Musk was more consisted of than would have been best. The sensible rate offered for SolarCity went beyond declaring the offer was utilized to make Musk richer.
The judge’s judgment follows a 10-day trial in July, that consisted of 2 total days of testimony from Musk.
If it had actually purchased SolarCity and shut it down, Musk argued that Tesla would have benefited from the offer even.
“The $3 billion of cash flows is 50% higher than the amount we paid,” Musk said. “Even if we had simply bought SolarCity and shut it completely down we would have gotten $3 billion in cash flows for $2 billion. This is a no brainer.”
The complainants in case thought that Musk should be required to personally repay the $2.6 billion to Tesla for a breach of his fiduciary obligations as the alleged managing investor. The judgment would have been one of the largest in history against an individual if they had actually been effective.
The law in Delaware, where Tesla is incorporated, defines that the boards of directors manage the company. This uses board members’ discretion on whether to authorize any actions advanced by the business’s CEOs.
The complainants bore in mind in their claim that the large weight of Musk’s celebrity-status image as Tesla’s CEO sufficed to eclipse the board and put him in a position of excessive impact over the purchase choice.
The suit, in the beginning, targeted Tesla’s whole board, however, the other board members settled out of court for $60 million in January 2020. Musk was the only one who chose to fight the case.
The judgment follows the approval of his quote to purchase the social media, big-tech giant Twitter today.