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A Delaware court has sided with Tesla CEO Elon Musk in a bitter legal battle over whether he acted against the best interests of other shareholders in leading the electric-car maker to a $2.6 billion takeover one of two solar module manufacturer founded by his cousins.
The 132-page decision, issued Wednesday by Delaware Chancery Court Vice Chancellor Joseph R. Slight, upheld Musk, who appeared on the witness stand during two days of often combative testimony last summer. Musk defended his reasons why he thought it was a good idea for Tesla to buy SolarCity in November 2016, even as some analysts and some shareholders questioned the deal’s wisdom.
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Musk decided to fight the lawsuit even after other Tesla board members reached an unadmitted $60 million settlement at the time of the deal. Had the Delaware court ruled against him, Musk could have been ordered to pay $2 billion or more while trying to complete a $44 billion acquisition of Twitter. Musk has pledged to take $21 billion of the price of the Twitter deal that closed earlier this week.
The long-running shareholder lawsuit alleged that Musk violated his fiduciary suit by pursuing the SolarCity deal despite blatant conflicts of interest. Musk was SolarCity’s largest shareholder at the time Tesla closed the deal.
FILE – Tesla and SpaceX Chief Executive Officer Elon Musk speaks at the SATELLITE Conference and Exhibition in Washington on March 9, 2020. A Delaware court on Wednesday, April 27, 2022 sided with Musk in a bitter legal battle over whether he acted in the best interests of other shareholders when he sold the electric-car maker to a $2.6 billion deal – Acquisition of a solar panel manufacturer founded by two of his cousins. (AP Photo/Susan Walsh, file) (AP)
But Slights ruled that the acquisition was “entirely fair,” although he acknowledged that “Elon was more involved in the process than a conflicted trustee should be.”
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While shareholders had argued that Musk grossly misrepresented the value of SolarCity technology to Tesla, Slights disagreed. The judge pointed to evidence showing Tesla was able to sell solar and home battery storage products to consumers who also bought Tesla cars. “The overwhelming body of evidence indicates that the acquisition was and is synergistic,” the judge wrote.
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Tesla’s stock price has increased 22x since the completion of the SolarCity purchase, creating more than $850 billion in shareholder wealth. That apparently didn’t escape Slights, who noted that “Tesla’s value has increased massively since the acquisition.”