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A Deleware judge voids Elon Musk’s $56 billion Tesla compensation
Posted on 1/30/24 at 4:46 pm
Posted on 1/30/24 at 4:46 pm
quote:
A Delaware judge on Tuesday ruled that billionaire Elon Musk's $56 billion Tesla pay package could be voided, calling the compensation "an unfathomable sum" that was not fair to shareholders, according to a court filing.
"The plaintiff is entitled to rescission," the judge said in her ruling.
The court's opinion directed the Tesla shareholder who challenged the pay plan to work with Elon Musk's legal team on an order implementing the judge's decision.
Musk's lawyer did not immediately reply to an email seeking comment.
"Good day for the good guys," said an email from Greg Varallo, an attorney for the Tesla shareholder Richard Tornetta who brought the lawsuit.
The ruling can be appealed to the Delaware Supreme Court.
The judge, Kathaleen McCormick of Delaware's Court of Chancery, said the pay package did not meet the standard of a fair price.
"The incredible size of the biggest compensation plan ever -- an unfathomable sum -- seems to have been calibrated to help Musk achieve what he believed would make 'a good future for humanity'," wrote McCormick in her 201-page opinion.
Tesla's agreement with Musk is by far the largest compensation deal ever for an executive and it contributes a significant part of his fortune, which is one of the world's largest.
Tesla directors argued during a week-long trial that the company was paying to ensure one of the world's most dynamic entrepreneurs continued to dedicate his attention to the electric-vehicle maker. Antonio Gracias, a Tesla director from 2007 to 2021, called the package "a great deal for shareholders" because he said it led to the company's extraordinary success.
Tornetta's lawyers argued the Tesla board never told shareholders that the goals were easier to achieve than the company was acknowledging and that internal projections showed Musk was quickly going to qualify for large portions of the pay package.
The plaintiff's legal team also argued the board had a duty to offer a smaller pay package or look for another CEO and that they should have required Musk to work full-time at Tesla instead of allowing him to focus on other projects.
Musk in 2022 bought social media company Twitter, which he renamed X, and he has founded several startups, including brain implant company Neuralink, tunneling venture the Boring Co and SpaceX, a rocket venture.
Musk testified during the compensation trial in November 2022 that the money would be used to finance interplanetary travel.
"It's a way to get humanity to Mars," he testified. "So Tesla can assist in potentially achieving that."
The package grants stock option awards allowing Musk to buy Tesla stock at heavily discounted prices as escalating financial and operational goals are met.
He must hold the acquired stock for five years.
Musk qualified for all 12 tranches or performance targets in the plan. He was not guaranteed any salary.
The ruling will put the spotlight on Tesla's next round of compensation negotiations with the CEO. Musk said in a post on X in January that he was uncomfortable leading Tesla unless he had 25% of the voting control. The billionaire owned around 13% of the company at the time.
Tesla's value ballooned to briefly top $1 trillion in 2021 from $50 billion when the package was negotiated.
LINK
Not sure how he will make ends meet until this gets resolved
30
Posted on 1/30/24 at 4:47 pm to stout
It is pretty unfathomable.
Posted on 1/30/24 at 4:48 pm to stout
In other news, X.com/Twitter sees a rise in its valuation but is still down from its purchase price
LINK
quote:
Fidelity Ups X Holdings Valuation by 11% Amid Speculation $META $SNAP
Key Details:
Fidelity boosts X Holdings' (formerly Twitter) share value by over 11% in December.
Despite the markup, X's valuation remains 68% below its initial purchase price.
The rationale behind Fidelity's valuation adjustments for X remains undisclosed.
Public market trends, like Snap's 23% rise and Meta's 9% increase, may influence valuations.
Speculation arises about X shareholders potentially receiving shares in Musk's new AI venture.
Context/Background:
Fidelity's recent markup of X Holdings breaks a trend of markdowns, stirring discussions about the factors driving the revised valuation amid broader tech sector movements.
LINK
Posted on 1/30/24 at 4:49 pm to kywildcatfanone
quote:
It is pretty unfathomable.
Nah, unfathomable is whatever the hell our national debt is currently.
Posted on 1/30/24 at 4:49 pm to kywildcatfanone
quote:
It is pretty unfathomable.
Crazy that a judge can void what a BoD has decided.
Maybe that investor should sell his shares if he is unhappy with the BoD and Elon.
This post was edited on 1/30/24 at 4:50 pm
Posted on 1/30/24 at 4:50 pm to stout
No chance that sticks
Posted on 1/30/24 at 4:51 pm to CaptainJ47
quote:
No chance that sticks
Yea if it does then what is the point of a board making decisions on what's best for the business? Just let a judge decide.
Posted on 1/30/24 at 4:52 pm to stout
If he left the market cap of the company would crash. The guy is worth every penny.
Posted on 1/30/24 at 4:53 pm to stout
quote:
Crazy that a judge can void what a BoD has decided. Maybe that investor should sell his shares if he is unhappy with the BoD and Elon.
Not crazy at all. Thats how public companies work.
Posted on 1/30/24 at 4:54 pm to stout
quote:
Crazy that a judge can void what a BoD has decided.
No, it's not.
And it wasn't a board decision, it was a shareholder vote.
ETA: I don't have an opinion on the outcome, but corporate governance and executive pay in this country is a fricking joke and I'm an executive.
This post was edited on 1/30/24 at 4:56 pm
Posted on 1/30/24 at 4:57 pm to stout
quote:
The judge, Kathaleen McCormick of Delaware's Court of Chancery
Was she Marsha on the "Brady Bunch" when she was young?
As for Elon, I swear that dude is a real life "Bond Villain"
Posted on 1/30/24 at 4:58 pm to stout
Who wants to be a dictator?
Posted on 1/30/24 at 4:58 pm to Byron Bojangles III
quote:
frick musk
Salty.
Posted on 1/30/24 at 4:58 pm to stout
quote:
Tesla's agreement with Musk is by far the largest compensation deal ever for an executive and it contributes a significant part of his fortune, which is one of the world's largest.
got to keep up with inflation
This post was edited on 1/30/24 at 4:59 pm
Posted on 1/30/24 at 4:59 pm to Byron Bojangles III
quote:
frick musk
frick you.
Posted on 1/30/24 at 5:00 pm to Taxing Authority
quote:
Who wants to be a dictator?
Posted on 1/30/24 at 5:02 pm to LegendInMyMind
Thanos was way too conservative at 50%.
Posted on 1/30/24 at 5:04 pm to stout
quote:
Yea if it does then what is the point of a board making decisions on what's best for the business? Just let a judge decide.
There are cons to being a public company. In this case, the judge found the BoD was not fully transparent and breached their fiduciary duty in approving the comp package.
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