Teflon Elon has triumphed again. The Delaware Supreme Court has upheld a lower court decision that Elon Musk, the CEO of Tesla, did not influence the electric car company to overpay when it acquired rooftop solar provider SolarCity in 2016.
The $2.6 billion acquisition of SolarCity led a group of disgruntled Tesla shareholders to instigate a lawsuit. The shareholders believed that the deal was an attempt by Musk to rescue his investment in SolarCity. They sought to compel Musk to return Tesla stock acquired in the deal, valued at $13 billion at one point.
The plaintiffs contended that SolarCity was bankrupt in 2016. They argued that the market price, which made the company appear solvent, was heavily influenced by selective financial disclosures. A lower court sided with Tesla in 2022. The plaintiffs then appealed their case to the Delaware Supreme Court, which made its decision last Tuesday. The Supreme Court concluded that Tesla had paid a fair price for SolarCity.
Delaware Warms to Tesla
The June 6 decision comes on the heels of another major victory for Musk in the Diamond State. In mid-May, the Delaware Supreme Court ruled in favor of Tesla’s interpretation of Delaware’s Franchise Act. Originally put in place to protect franchise auto dealerships from being undercut by their parent companies, the Franchise Act has been used to prevent Tesla from selling directly to consumers. A lower court interpreted the law to mean that Tesla needs to start franchise dealerships in order to sell vehicles in Delaware. However, the Supreme Court overturned this ruling, stating that the Franchise Act is not relevant to Tesla’s direct sales business model.
With Tesla’s stock price rising over 100% since the start of 2023 and almost 1000% since 2018, it’s not surprising that the company is the target of legal attacks. Shareholders want more access to valuable Tesla stock. Meanwhile, dealers of conventional gas-powered cars are worried that they won’t be able to compete with Tesla’s superior technology. However, the rulings in Delaware show that the only way to defeat Tesla is to produce a better electric vehicle at a lower price.