According to a report by the Financial Times, lawyers representing shareholders who defeated Elon Musk’s $56 billion Tesla compensation plan are seeking nearly $6 billion worth of Tesla stock as compensation. The lawyers have requested the Delaware court to award them Tesla shares worth nearly $6 billion as compensation.
According to previous reports by Chain News, Musk has not received a fixed salary since 2018. Instead, he receives bonuses and dividends similar to performance bonuses each time he achieves the company’s set long-term goals. After meeting the criteria, Musk can purchase Tesla stocks at a price of $23.34 per share, but there is a 5-year lock-up period.
Because Musk has consistently met the goals every year, he currently owns 12.9% of Tesla’s stock, valued at $102.1 billion, according to CNBC’s website.
Tesla shareholders have been dissatisfied with Musk’s previous acquisition of Twitter and have not been able to focus much on Tesla’s operations. Finally, they took the matter to court, demanding the revocation of Tesla’s board of directors’ 2018 compensation plan granted to Musk.
Judge Kathaleen McCormick, responsible for this case, made a ruling last month, revoking Tesla’s board of directors’ 2018 compensation plan, including multiple batches of stocks granted after achieving positive operational and financial milestones, worth approximately $56 billion. The judge believed that Tesla’s board of directors was not independent enough and that the governance process and stock value allocation were “unfair” to other shareholders.
The lawyers responsible for the lawsuit, Bernstein Litowitz Berger & Grossmann, stated in documents submitted to the Delaware court on Friday that the absolute value of this ruling is “unprecedented.” They are requesting 11% of the 2.67 billion shares received by Musk as compensation, which is approximately 290 million Tesla shares, worth about $6 billion. They also stated that the payment in stocks could reduce Tesla’s taxes.
The benefits of this structure are that it directly links rewards to the benefits created and avoids extracting any money from Tesla’s balance sheet to pay for expenses. We are ready to enjoy our meal.
After seeing the news, Musk also disdainfully posted, “Those lawyers who have done nothing but harm Tesla want $6 billion. They are indeed criminals!”
After receiving the judgment, Musk complained to the Delaware Court of Chancery and advised other companies to relocate their registration to other states. Subsequently, he transferred the registration of his two companies from Delaware to Texas and moved Neuralink to Nevada.
However, lawsuits are nothing new for Musk. He was previously sued by investors over Dogecoin, and recently he also filed a lawsuit against OpenAI and its founder Sam Altman, claiming that it has become a subsidiary of Microsoft and is purely profit-driven. It is expected that Musk will appeal his compensation case.
Elon Musk
Tesla