Elon Musk (52) has to worry about a block of shares worth 56 billion dollars (52 billion euros), which makes him the richest person in the world. The electric car manufacturer led by Musk Tesla had promised him stock options in 2018 if ambitious targets for market value and business figures were reached. However, a judge in the US state of Delaware now found that Musk had too much influence in the background when the plan was agreed upon for one to be able to speak of a fair procedure.
In the trial, judge Kathaleen McCormick (44) ruled in favor of the plaintiff, who wants to annul the agreement with Musk. She left it open on Tuesday as to what would happen next. She instructed the plaintiff and Tesla to work out a solution.
Musk has not yet been able to cash in stock options
The judge did restrict that the cancellation of the megadeal does not automatically follow from the finding that the agreement was created under unfair circumstances. However, an annulment is the preferred solution in Delaware. “Plaintiff is entitled to annulment,” she wrote.
Musk was granted the stock options according to the plan, but has not yet been able to redeem them due to the legal dispute. The financial service Bloomberg listed him in first place in its billionaire ranking on Wednesday with an estimated fortune of $205 billion. It was also in first place at Forbes. The package is taken into account in such estimates. Without the $56 billion, he would be behind the head of the luxury group LVMH, Bernard Arnault (74), and Amazon-Founder Jeff Bezos (60).
According to the 2018 contract, Musk could receive stock options with a maximum value of up to $55.8 billion in twelve steps if Tesla’s stock market value and business figures grew with certain minimum values. The judge ruled that Tesla’s shareholders had not been properly informed about the process in which the huge package was negotiated. Musk had close connections with some people who were involved in the negotiations on Tesla’s side.
Musk starts survey on X again
The electric car manufacturer and Musk can still appeal. Musk initially did not comment on this. But he began preparing the ground for moving Tesla’s headquarters from Delaware to Texas. On his online platform He then started a survey at X asking whether Tesla’s legal headquarters should be moved to its headquarters in Texas. After a few hours, approval was at 90 percent – and Musk has used such surveys several times to justify his decisions.
The agreement’s targets seemed extremely steep in 2018. Above all, one requirement was that Tesla’s market value rose from around $50 billion to around $650 billion. But investors’ euphoria over the success of the Model 3 and Model Y compact cars made it possible: at its peak, Tesla was worth more than a trillion dollars. In the meantime, sales growth weakened – and the market value on Tuesday was “only” $610 billion.
The judge raised several questions in her approximately 200-page ruling. Had there been serious negotiations between Musk and Tesla about the extent of compensation? After all, the board of directors should be committed to the interests of the shareholders. And was it even necessary to offer Musk so much so that he would be more interested in the company’s economic success?
Judge speaks of “superstar attraction”
McCormick called the latter “the $55.8 billion question” that the Tesla board never asked itself, perhaps because of Musk’s “superstar appeal.” The agreement was intended to increase his Tesla stake to up to 28.3 percent. The judge pointed out that the Tesla boss already owned a 21.9 percent stake in Tesla at this point. The targeted price increases would have allowed his assets to grow, she emphasized. In addition, he has shown no intention of leaving Tesla.
From McCormick’s point of view, things weren’t looking any better with the independence of the Tesla negotiators. Among other things, she referred to General Counsel Todd Maron, “who was Musk’s former divorce lawyer and whose admiration for Musk moved him to tears during questioning.”
Other members of the board of directors were also closely linked to Musk – and he himself proposed the stock plan and determined the pace of the discussions. The judge particularly emphasized that Musk said in the trial that he had “negotiated against himself.”
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Musk’s current stake in Tesla is around 13 percent – He had sold shares on a large scale in order to buy Twitter for around $44 billion in 2022. He recently said that he wanted control of a quarter of the voting rights before taking Tesla deeper into the artificial intelligence and robots business.
Numerous US companies have their headquarters in Delaware because of the favorable tax rules. McCormick was also the judge in the legal dispute between Twitter and Musk, who wanted to withdraw from the purchase agreement. Shortly before the trial begins However, Musk gave in and completed the Twitter takeover.