Court Rules Tesla Misled Shareholders Over Elon Musk's $55 Billion Pay

A significant portion of Tesla CEO Elon Musk's wealth is tied to his Tesla stock position. However this week, a Delaware court ruling has just massively reduced that position—at least for now. The ruling comes after Tesla was taken to court by shareholders over a historically large compensation agreement offered to Elon Musk that's valued at $55 billion, and it's now alleged that there could have been some misdirection involved to secure such a big pay package.

Specifically, shareholders were not happy with the 12-tranche stock option package awarded to Musk in 2018. Valued at $55 billion it was the largest executive payment package in history according to representatives from Bernstein Litowitz Berger & Grossman, the law firm that represented the Tesla shareholder during the trial. To put that in perspective, $55 billion is enough to money to buy 901,787 Tesla Cybertrucks. It's $20 billion more than GM announced as an investment into its entire Ultium EV program ... to combat Tesla.

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In order for Musk to get that very large compensation package, the company would have to reach a set of milestones that were supposed to be "very difficult" to achieve. However, in the trial shareholders alleged that they had proof that the proxy disclosures were misleading, and that the arranged milestones were not actually projected to be difficult at all but instead should have been expected based on confidential projections that Tesla shared with banks.

Furthermore, the shareholders claimed that the proxy detailed that Tesla's compensation committee and board were independent, in order to ensure a fair assessment of Musk's valuation against shareholder interests, when the selected committee individuals actually weren't. Allegedly, the specifics of the compensation plan came directly from Musk himself and not the committee, and Musk was accused of having influence over the committee due to close business relationships he had with certain members.

Under Elon's watch, Tesla's valuation went from $53 billion to $800 billion, and temporarily reached $1 trillion according toAP.Musk's defense attorney argued that due to Tesla's value increase, the payment package benefited shareholders as well as Musk. Chancellor Kathaleen McCormick didn't agree with the defense but she did agree with the shareholders, ruling in their favor which resulted in the $55 billion stock package being rescinded, at least until it's appealed or challenged by Musk again.

Apparently, not one to miss out on a prime pun opportunity, Chancellor McCormick stated in her 200-page decision that: "In the final analysis, Musk launched a self-driving process, recalibrating the speed and direction along the way as he saw fit. The process arrived at an unfair price." As you might imagine Musk took to "X" to subtly share his displeasure with the decision, stating: "Never incorporate your company in the state of Delaware."

Then Musk posted a poll asking his followers if Tesla should change its state of corporation to Texas, since that is the home of its new HQ. Over 87 percent of the poll participates voted "yes." Musk followed up posting that "Tesla will move immediately to hold a shareholder vote to transfer state of incorporation to Texas." Maybe Musk should be a little more careful when posting about his financial plans for Tesla. The last time he did that, it didn't go so well.