Major $55 billion shock for Elon Musk

In 2018, Tesla shareholders approved a package that provided Musk with incentives for reaching specific targets, including a market valuation of 650 billion dollars, which was more than 10 times Tesla's value at the time. However, a Delaware Court of Chancery judge has ruled that Elon Musk cannot receive the promised 55 billion dollar pay package. The decision means the Tesla board of directors must present a new proposal.

According to a Bloomberg report, the decision threatens Musk's wealth if it goes to appeal. Without the options in this package, Musk could become only the third-richest man in the world. The core question of the trial focuses on whether Musk misled shareholders when presenting this plan.

Greg Varallo, the attorney for Tesla investor Richard Tornetta who filed the lawsuit, stated that shareholders were not told that Musk had personally prepared the plan or that board members were indebted to Musk. Last February, Judge Kathaleen McCormick described this claim as information that would “decide the case.”

In her ruling, McCormick wrote, “The defendants failed to prove that the shareholders' votes were fully informed because the proxy statement incorrectly identified key directors as independent and misleadingly failed to present details about the process,” and continued: “The defendants proved that Musk was uniquely motivated by ambitious goals and that Tesla desperately needed Musk to succeed in its next phase of development, but these facts do not justify the largest compensation plan in the history of public markets.”

One of the biggest questions in the case was how much of Tesla Musk actually controlled, not just through his own shares. “Musk held the maximum influence a director could exert over a company,” McCormick wrote.

The board consisted of many people with close ties to Musk:

• Elon Musk
• Antonio Gracias, a member of the compensation committee and a friend of Musk: He earned a massive fortune by investing in Musk's companies over a period dating back to PayPal.
• James Murdoch: Another friend of Musk who vacations with him around the world.
• Musk's brother, Kimbal.
• Ira Ehrenpreis: A member of the compensation committee who admitted in his court testimony that his relationship with Elon and Kimbal Musk had a “significant impact on his professional career.”
• Brad Buss, another member of the compensation committee: He owed 44 percent of his net worth to Musk-affiliated entities.
• Robyn Denholm: A member of the compensation committee whose compensation as Tesla board chair was higher than what she earned from other sources.
• Linda Johnson Rice, who appeared truly independent.
• Steve Jurvetson, who was away from work for a long time during this event and was not considered significant by the jury.
• McCormick wrote, “Ultimately, the key witnesses told it all; they were not there to negotiate against Musk, but to collaborate with him.”

Musk has recently demanded more control over Tesla, and in a post on X earlier this month, he said he wanted to own at least 25 percent of the company to continue his artificial intelligence work. This is about double his current stake of approximately 13 percent.

In subsequent posts, Musk said he was waiting for a ruling in the shareholder lawsuit before taking a proposal for a larger ownership stake to the board. In a post on January 15, he wrote, “The reason there is no new ‘compensation plan’ is that we are still waiting for a ruling in my Delaware compensation case,” and added: “The trial for this was held in 2022 but a decision has not yet been reached.”

Following the new ruling, Musk made another post, clearly stating that he was not at all pleased with the decision: “never incorporate your company in the state of Delaware.”

News Source: 12punto