The Delaware Supreme Court recently affirmed the Delaware Court of Chancery’s 2022 post-trial decision that Tesla’s 2016 all-stock acquisition of SolarCity Corp. satisfied the entire fairness standard of review, and thus did not involve breaches of fiduciary duty. See In re Tesla Motors Stockholders’ Litigation, ___ A.3d ___, 2023 WL 3854008 (Del. Jun. 6, 2023). The stockholder-plaintiffs argued on appeal that the Court of Chancery erred in its application of the entire fairness standard. Writing for the court en banc, Justice Karen L. Valihura explained why the stockholder-plaintiffs’ arguments did not undermine the Court of Chancery’s conclusions as to either “fair dealing” or “fair price.”

The Delaware Supreme Court’s Decision

Due to Elon Musk’s large stock ownership and board and management positions at both the acquirer (Tesla) and the target (SolarCity), the Court of Chancery assumed without deciding that the transaction should be reviewed under the Delaware’s most stringent standard of review, i.e., the entire fairness standard. The Supreme Court proceeded similarly.

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