In re Tesla Motors, Inc. Stockholder Litigation

The Delaware Supreme Court affirmed the Court of Chancery’s determination that Tesla’s 2016 acquisition of the solar energy company SolarCity Corporation was “entirely fair.” The Supreme Court found that the trial record supported the Chancery Court’s decision and that the Chancer Court committed no reversible error in its application of the entire fairness test, which requires scrutiny of both fair dealing and fair price. Among other things, the Supreme Court rejected the appellants’ contention that the trial court erred when it relied on the potential synergies of the acquisition as evidence of the fairness of the price. The Supreme Court said “synergistic values are a relevant input for a court to consider in assessing the entire fairness of an acquisition,” including in this case where potential synergies related to the objective of making Tesla an integrated, sustainable energy company were a motivator for the transaction.