ETFOptimize | High-performance ETF-based Investment Strategies

Quantitative strategies, Wall Street-caliber research, and insightful market analysis since 1998.


ETFOptimize | HOME
Close Window

Musk's $55B pay package continues to be scrutinized in court

Attorneys argued on Tuesday that Elon Musk's 2018 pay package worth a potential $55 billion should be invalidated.

Elon Musk's massive pay package from 2018 is still under scrutiny in a Delaware court.

Attorneys for a Tesla shareholder urged the judge on Tuesday to invalidate a 2018 compensation package awarded by the company’s board of directors that is potentially worth more than $55 billion.

The latest arguments follow a November trial at which Musk denied he dictated the terms of the package or attended any meetings at which the plan was discussed by the board, its compensation committee, or a working group that helped develop it.

The shareholder's lawyers argue that the compensation package should be voided because it was dictated by Musk and the product of sham negotiations with directors who were not independent of him. 

ELON MUSK DEFENDS $56 BILLION PAY PACKAGE IN COURT: REPORT

They also say it was approved by shareholders who were given misleading and incomplete disclosures in a proxy statement.

Delaware courts often defer to the "business judgment" of corporate directors in decision-making absent a showing of wrongdoing. 

Attorney Greg Varallo argued that the Tesla defendants should be required to show that the compensation plan was "entirely fair" to stockholders because Musk was a controlling shareholder.

Varallo told Chancellor Kathaleen St. Jude McCormick that Musk should be forced to give back some, if not all, of the stock option grants he has earned.

TESLA WAS THE USA'S BEST SELLING LUXURY CAR BRAND IN 2022, BEATING BMW AND MERCEDES-BENZ

McCormick is the same judge who forced Musk to purchase Twitter for $44 billion when he tried to back out of his agreement to buy the social media platform.

Defense attorneys countered that the pay plan was fairly negotiated by a compensation committee whose members were independent, contained performance milestones that were so lofty they were ridiculed by some Wall Street investors, and blessed by a shareholder vote that was not even required under Delaware law. 

Musk, who owned about 22% of Tesla when the plan was approved, would get stock equal to 1% of outstanding shares at the time of the grant. His interest in the company would grow to about 28% if the company’s market capitalization grew by $600 billion.

TESLA SHARES REBOUND FROM JANUARY BOTTOM

Tesla has achieved all twelve market capitalization milestones and eleven operational milestones, providing Musk nearly $28B in stock option gains, according to a post-trial brief filed by plaintiff’s attorneys. 

Defense attorney Evan Chesler said the compensation package was a "high-risk, high-reward" deal that benefited not just Musk, but Tesla shareholders who have seen the value of the company climb from $53 billion to more than $600 billion, having briefly hit $1 trillion last year.

The Associated Press contributed to this report.

Stock Quote API & Stock News API supplied by www.cloudquote.io
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms Of Service.


 

IntelligentValue Home
Close Window

DISCLAIMER

All content herein is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor should it be interpreted as a recommendation to buy, hold or sell (short or otherwise) any security.  All opinions, analyses, and information included herein are based on sources believed to be reliable, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. We undertake no obligation to update such opinions, analysis or information. You should independently verify all information contained on this website. Some information is based on analysis of past performance or hypothetical performance results, which have inherent limitations. We make no representation that any particular equity or strategy will or is likely to achieve profits or losses similar to those shown. Shareholders, employees, writers, contractors, and affiliates associated with ETFOptimize.com may have ownership positions in the securities that are mentioned. If you are not sure if ETFs, algorithmic investing, or a particular investment is right for you, you are urged to consult with a Registered Investment Advisor (RIA). Neither this website nor anyone associated with producing its content are Registered Investment Advisors, and no attempt is made herein to substitute for personalized, professional investment advice. Neither ETFOptimize.com, Global Alpha Investments, Inc., nor its employees, service providers, associates, or affiliates are responsible for any investment losses you may incur as a result of using the information provided herein. Remember that past investment returns may not be indicative of future returns.

Copyright © 1998-2017 ETFOptimize.com, a publication of Optimized Investments, Inc. All rights reserved.