In In re Tesla Motors, Inc. Stockholder Litigation, C.A. No. 12711-VCS, the Chancery Court considered the status of one of the acquiror’s minority stockholder in an acquisition. The plaintiffs alleged that the minority stockholder was a conflicted controlling stockholder because of his 29.1% ownership in the target as well as his 22.1% ownership in the acquiror and his influence in the acquiror. The Court found that a minority stockholder, who was the co-founder of the acquiror and its visionary, had tremendous influence on the Board’s decision-making process. As a result, the minority stockholder was a controlling stockholder notwithstanding his small percentage ownership in the acquiror. In turn, since a majority of the Board was not disinterested or independent of the controlling stockholder, the protections of Corwin did not apply.
BOTTOM LINE: Once again, context matters; do not assume Corwin will apply simply because there is no stockholder that owns a majority of the outstanding shares.