A lawsuit between Tesla Shareholders and Elon Musk ended on Wednesday with a Delaware court ruling in favor of CEO Elon Musk. Shareholders believed Tesla’s acquisition of SolarCity in 2016 was a bailout of a company owned by two of Musk’s cousins, which was unfair to them.
The trial started in July 2021, and within the first few days, Musk had made remarks that it was a stock-for-stock transaction that resulted in “no financial gain.” Shareholders requested that Musk repay the $2.6 billion price tag for the acquisition of SolarCity after they claim he applied heavy pressure on Tesla’s board to purchase the company.
Tesla stock fell over 10 percent after the acquisition of SolarCity was announced, which made investors skeptical of the benefits of the deal. The plaintiffs argued that Musk was able to convince Tesla’s board to acquire the company by misrepresenting the financial situation of SolarCity. Musk claimed the company could be cash-flow positive within six months, but the shareholders argued that no financial experts agreed with this claim.
Musk also said the during the early days of the case that the acquisition of SolarCity was crucial to his “Master Plan, Part Deux,” a continuation of the CEO’s “top secret” playbook for transitioning the world to sustainable energy. Additionally, he stated that he did not control the appointment or compensation of SolarCity board members at the time of the acquisition, and he did not influence the deal’s terms.
The Judge in the case said (via CNBC), “Elon was more involved in the process than a conflicted fiduciary should be. And conflicts among other Tesla Board members were not completely neutralized. With that said, the Tesla Board meaningfully vetted the Acquisition, and Elon did not stand in its way.”
If Musk would have lost the case, he would have had to pay upwards of $2 billion, one of the largest judgments to ever be decided against one person. CNBC says the ruling is likely to be appealed.
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