COURT HEARS APPEAL OF RULING FAVORING MUSK IN SOLARCITY DEAL

Attorneys for a group of Tesla shareholders are asking the Delaware Supreme Court to overturn a judge’s decision in favor of CEO Elon Musk in a lawsuit challenging the electric car maker’s $2.4 billion acquisition of a solar panel company founded by two of his cousins.

The plaintiffs argued Wednesday that a Chancery Court judge erred in finding that Tesla’s deal to acquire SolarCity in 2016 was “entirely fair,” even though the judge found that the process by which Tesla’s board of directors negotiated and recommended the deal to shareholders was “far from perfect.”

“Elon was more involved in the process than a conflicted fiduciary should be. And conflicts among other Tesla Board members were not completely neutralized,” former Vice Chancellor Joseph Slights wrote last year. “With that said, the Tesla board meaningfully vetted the acquisition, and Elon did not stand in its way. Equally if not more important, 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.”

At the time of the acquisition, Musk owned about 22% of Tesla’s common stock and was the largest stockholder of SolarCity, as well as chairman of its board of directors.

A key issue presented to the Supreme Court is Slights’ conclusion that the deal met the heightened scrutiny of Delaware’s “entire fairness” standard.