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Delaware Chancery Court Judge Joseph Slights III concluded that the multibillionaire properly used his influence with his fellow Tesla directors to persuade them to acquire the struggling solar power provider Musk founded with his cousins. Tesla investors had demanded Musk return Tesla shares he received as part of the $2.6 billion acquisition in 2016.
Slights found that Musk, who served as SolarCity’s chairman and largest shareholder at the time of the purchase, wasn’t improperly on both sides of the deal and didn’t ram it through at the expense of Tesla shareholders. Disgruntled investors argued SolarCity was insolvent at the time and not worth the price.
“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,” Slights said in his 131-page ruling.
The ruling burnishes Musk’s reputation as a free-wheeling entrepreneur who relishes going against the grain as he runs the world’s largest maker of EVs, and spares him what could have been a substantial ding even to his vast personal fortune.
Musk, 50, has wealth valued at $253 billion.
The investors who sued accused Musk of improperly prodding Tesla directors to sign off on the SolarCity buyout “at a patently unfair price, following a highly flawed process, in order to bail out” family members, Slights noted in the ruling
He was the only Tesla director to challenge the investors’ claims in court. His board colleagues agreed to a $60 million settlement of allegations by disgruntled shareholders that they were duped into backing the SolarCity deal. That accord was funded by insurance covering Tesla’s officers and directors.
In pre-trial rulings, Slights found that Musk, despite holding only a 17% stake in Tesla at the time of the deal, used his “visionary” persona and ties to other Tesla directors to smooth its path. In a colorful and sometimes irreverent stint on the witness stand during the trial last year in Wilmington, Delaware, Musk testified he tried to be helpful to the board as it weighed the deal but never sought to steamroll it.
“To be honest, I don’t want to be the boss of anything,” he said on the stand. “I don’t want to be CEO. I tried not to be CEO of Tesla, but I had to or it would die. I rather hate being a boss. I’m an engineer.”
In his testimony, Musk acknowledged helping hire lawyers to guide the deal through board confirmation and holding weekly meetings to light a fire under the due diligence process.
He maintained that the solar power company was on a solid financial footing, but had noted in an internal memo the firm needed to solve its “liquidity crisis.” It turned out SolarCity was hemorrhaging cash and in danger of defaulting on its debt, according to court testimony.
But Musk dismissed claims of impropriety, having recused himself from deliberations over the deal and been barred from the Tesla directors’ final approval vote.