In a brief telephone hearing on Monday, a Delaware judge opted to approve a $60 million settlement for a shareholder lawsuit stemming from Tesla’s $2 billion acquisition of clean energy company SolarCity in 2016. Interestingly, the judge granted the settlement approval for Tesla’s directors, but not Elon Musk, as the CEO is poised to face his own SolarCity-related case next March.
Apart from the $60 million settlement, Judge Joseph Slights III approved $16.8 million in legal fees and expenses that were requested by the plaintiff’s lawyers. As noted in a report from ABC News, this amount corresponds to about 28% of the case’s “derivative settlement,” which was made on behalf of the company and is poised to be paid by insurers.
“It’s a substantial amount of money,” the Judge Sights said.
The plaintiff’s lawsuit against Tesla’s directors alleges that the executives breached their fiduciary duties to TSLA shareholders by simply allowing Musk to go through his personal intentions to purchase SolarCity, which was in rough straits at the time. The Tesla CEO was the largest SolarCity shareholder then, and the case’s plaintiffs argued that the buyout ended up improperly benefitting Musk, his cousins who co-founded the company, and Tesla’s directors who also owned shares in SolarCity.
Musk, for his part, has defended Tesla’s SolarCity acquisition. As could be seen in pre-trial depositions that were made public last year, the CEO noted that the acquisition was a strategic move for Tesla, and that the solar company would have been fine by itself even if it had not been acquired. He also dismissed the plaintiff’s lawyers, stating that they were “barking up the wrong tree.”
“SolarCity would have done just fine by itself and Tesla would have done just fine by itself, but in the long-term, they are better together. And that is what the future will show. That is why I think you should stop wasting your time now,” Musk said, as noted in a Bloomberg report.
Tesla and Elon Musk have both maintained that the SolarCity acquisition was a step in the right direction, as solar panels and energy storage, together with electric vehicles, comprise an ecosystem of products that can grant energy independence to customers. This point was outlined by Tesla in an announcement back in 2016.
“Solar and storage are at their best when they’re combined. As one company, Tesla (storage) and SolarCity (solar) can create fully integrated residential, commercial and grid-scale products that improve the way that energy is generated, stored and consumed… By joining forces, we can operate more efficiently and fully integrate our products, while providing customers with an aesthetically beautiful and simple one-stop solar + storage experience: one installation, one service contract, one phone app,” the company noted.
Elon Musk explained this point further during the second-quarter earnings call. According to the CEO, there are three elements of a sustainable future, and two of them are related to Tesla Energy, which offers solar solutions and battery storage. “So, there’s like three elements of the sustainable energy future. Wind and solar sustainable energy generation, battery storage and electric transport. Those three things. And the mission of Tesla is to accelerate sustainable energy. So that kind of says enough,” Musk said.
Tesla directors except Elon Musk get court approval for $60M SolarCity settlement