A trial court properly found that Tesla Inc TSLA-Q CEO Elon Musk did not push the electric car maker to overpay for SolarCity in 2016, the Delaware Supreme Court said on Tuesday, ending years of litigation over the $2.6 billion deal.
Musk was the biggest shareholder in both companies at the time, and Tesla shareholders alleged the billionaire pushed the carmaker’s board into the deal to bail out his investment in the struggling rooftop solar company.
The state’s highest court said that while a judge on the Delaware Court of Chancery erred in some portions of his analysis, his overall premise still supported his determination that Tesla paid a fair price for SolarCity.
Randall Baron, an attorney for the union pension funds and asset managers who sued, declined to comment.
The shareholders were appealing a 2022 ruling by Vice Chancellor Joseph Slights, who has since retired, that rejected shareholder claims that SolarCity was insolvent at the time of the deal.
They had argued that Slights wrongly relied on the market price for SolarCity, which the Tesla shareholders said was influenced by the solar panel company’s selective disclosures about its finances.
They also argued that Slights determined after a 10-day trial in 2021 that Musk meddled in the deal but failed to hold him liable.
Shareholders wanted to force Musk to return the Tesla stock he received in the takeover, which at one point was worth $13 billion.
The Delaware Supreme Court said the presentation of Slights’ ruling could have been better but overall his findings supported his conclusion, particularly the “total collapse” of the shareholders’ theory that SolarCity was insolvent.
“The trial court’s opinion is replete with factual findings and credibility determinations, and those determinations have not been challenged and decidedly weigh in favour of Musk,” the court said in a unanimous 106-page opinion.
Eric Talley, a Columbia Law School professor who joined a group of scholars in filing a friend of the court brief in support of Tesla shareholders, said he still had serious questions.
“In the end, perhaps more than anything, this outcome will add another hash mark on Elon Musk’s belt for being able to avoid legal scrutiny,” Talley said in an e-mail.