[rayiner]

Lawsuits can fail for lots of reasons without a decision on the merits. It seems relevant that the reason the lawsuit failed is because the court looked at the fairness of the transaction and determined that Tesla paid a fair price.

[nmca]

This whole thread is true consistent statements that differ only in emphasis.

[lcnPylGDnU4H9OF]

> differ only in emphasis

The commenter you are responding to is explicitly intending to place more emphasis on the reason why the lawsuit failed. That is why they used the phrase “burying the lede” in their initial comment.

[srveale]

True!

[glenstein]

Hold on, I feel like everyone's missing that theres a real argument here. I think the key point was:

>They are just judging if anything reaches the point where shareholders were legally harmed, which still gives a lot of gray area to the acquiring company.

This distinguishes the lawsuit failing from the idea that a fair price was paid. The competing contentions are (a) fair price vs (b) unfair but beneath threshold of legally punishable harm.

[rayiner]

Note that this is a civil suit, so the concept of a “threshold of legally punishable harm” doesn’t apply. There’s no “punishment,” and the plaintiff doesn’t need to meet the high standards (proof beyond a reasonable doubt, etc.) for imposing a punishment.

Under Delaware law, there’s two standards for evaluating this kind of claim. When there is no conflict of interest, the court applies the “business judgment rule,” which is similar to what you seem to be thinking—it gives corporate officers wide latitude.

But when there is a conflict of interest, the court applies the “entire fairness” standard, which requires both fair dealing and a fair price. And a fair price means what it sounds like—it’s what an objective businessman would consider a fair price under the circumstances. It doesn’t need to be the best price, but it must be within the range of fair. And to establish a fair price, the court relies on evidence from financial valuation experts. It’s a rigorous standard that’s hard to meet.

[kelnos]

> And to establish a fair price, the court relies on evidence from financial valuation experts.

I generally find expert testimony to be suspect. Anyone can be trotted forward as an expert, rattle off their credentials, and say whatever they feel like saying, depending on who is paying them to testify. And financial valuation is not a science; there is of course plenty of math involved that takes into account hard, objective numbers, but a good chunk of it is opinion, too, as no one an know the future.

Having said that, the Delaware Chancery Court of course has more experience in these matters than any other state's courts, so I am of the opinion that they're less likely to be duped by "experts", but sill... it can and does happen.

[glenstein]

I feel like this fixation on "punishment" as a legal term of art is not strictly necessary and my point can be reinterpreted in a charitable way that restates the same thing using different but functionally equivalent magic words.

So swap out "punishable" and instead say "legally actionable" (or other preferred synonym) and you nevertheless have an assessment that falls under what you noted is the entire fairness standard and the upshot is the same.

Also my understanding is that courts defer to the experts of the acquiring company. And if those experts are predisposed to have a favorable interpretation that favors the acquiring company, the valuation is in the less than optimal range of a range of values produced even by them, and they, by contrast to an actual market, might be much more lenient than a market would be in determining the price. So there's a convergence of variables that underscore the difference between fair as we conventionally understand the term (which is what we were all interested in here) and whatever it means to have survived legal scrutiny in Delaware.

Which again I would say means that this debate has real teeth and it's more than semantically equivalent differences in emphasis.

[gonzo]

"Beyond a reasonable doubt" is the legal standard in criminal cases. "Preponderance of the evidence" is the standard in civil cases.

[michaelmrose]

(c) no fair price can possibly be determined but the burden of proof lies with the claimant

(d) a court has no idea what a fair price would look like but made a finding of fact based on expert testimony despite being poorly situated to evaluate it

[fedestair]

(e) the court in question answers to Delaware which is in the business of siding with any company that incorporates there.

[SilasX]

That’s generous. One party is stubbornly missing that the Delaware court’s ruling is weak evidence of a proper valuation having been done, but wants to parrot an irrelevant textbook understanding that obfuscates that conclusion.

[DannyBee]

It's worth pointing out (IMHO) given the other comments that it's actually more than that - the fairness standard requires they prove the process was fair as well (IE a fair process that generated a fair price), which the court found they did as well.

(As you know, but others may not - this is not always the standard vs the business judgment rule, but is the standard here)