Elon Musk has a stock package worth $56 billion to worry about, making him the richest person in the world. The electric car manufacturer Tesla, led by Musk, had promised him stock options in 2018 if ambitious targets for the stock market value and operating figures were achieved. However, a judge in the American state of Delaware now ruled that Musk had too much influence in the background when the plan was approved to be able to speak of a fair procedure.
Judge Kathaleen McCormick therefore ruled in favor of the plaintiff who wants to terminate the agreement with Musk. On Tuesday, she left the door open to what would happen next. She instructed the plaintiff and Tesla to find a solution.
“Right of withdrawal”
The judge did limit that termination of the mega deal does not automatically result from the finding that the agreement was concluded under unfair circumstances. However, in Delaware, an annulment is the preferred remedy. “The plaintiff is entitled to an annulment,” she wrote.
Musk received the stock options according to the plan, but has not yet been able to cash them in due to the legal dispute. The financial service Bloomberg placed him first on Tuesday in its ranking of billionaires with an estimated fortune of $205 billion. Such estimates take the package into account. Without the $56 billion, he would be behind the head of luxury group LVMH, Bernard Arnault and Amazon founder Jeff Bezos.
No correct communication
Under the 2018 plan, Musk could receive stock options with a maximum value of up to $55.8 billion in 12 steps if Tesla’s stock market value and operating figures grew by certain minimum values.
The judge ruled that Tesla shareholders were not properly informed about the process in which the enormous package was negotiated. Musk had close ties to some of the people involved in the negotiations on the Tesla side.
Appeal is possible
The electric car manufacturer and Musk can still appeal. Musk initially did not comment on this. But he began preparing to move Tesla’s headquarters from Delaware to Texas. On its online platform
He then launched an investigation at X asking whether Tesla’s legal headquarters should be moved to its Texas headquarters. After a few hours, approval stood at 90 percent – and Musk has used such surveys several times to justify his decisions.
The goals of the agreement seemed extremely high in 2018. Above all, one requirement was that Tesla’s market value increase from about $50 billion to about $650 billion. But investor euphoria over the success of the Model 3 and Model Y compact cars made this possible: At its peak, Tesla was worth more than a trillion dollars. In the meantime, sales growth weakened – and the market value also reached $610 billion on Tuesday.
Open questions
The judge asked several questions in her roughly 200-page ruling. Had there been serious negotiations between Musk and Tesla about the amount of compensation? Ultimately, the board of directors must be committed to the interests of the shareholders. And was it even necessary to offer Musk so much that he would be more interested in the company’s economic success?
McCormick called the latter “the $55.8 billion question” that Tesla’s board never asked itself, perhaps because of Musk’s “superstar appeal.” The deal was intended to increase its stake in Tesla to 28.3 percent. The judge pointed out that the Tesla boss already owned a 21.9 percent stake in Tesla at that time. The targeted price increases would allow his assets to grow, she pointed out. Furthermore, he has shown no intention of leaving Tesla.
Allied negotiator
From McCormick’s point of view, things didn’t look any better with the independence of the Tesla negotiators. She referred, among other things, to General Counsel Todd Maron, “who was Musk’s former divorce lawyer and whose admiration for Musk moved him to tears during the interrogation.” Other members of the board of directors were also closely associated with Musk – and he himself proposed the share plan and set the pace of the discussions. The judge especially emphasized that Musk said in the lawsuit that he had “negotiated against himself.”
Musk’s current stake in Tesla is around 13 percent – he had sold shares extensively in order to buy Twitter for around $44 billion in 2022. He recently said he wanted to control a quarter of the voting rights before taking Tesla deeper into the business of artificial intelligence and robots.
Numerous American companies have their headquarters in Delaware due to favorable tax rules. McCormick was also a judge in the legal dispute between Twitter and Musk, who wanted to withdraw from the purchase agreement. However, shortly before the trial began, Musk relented and completed the acquisition of Twitter. (sda/dpa)
Soource :Watson
I am Amelia James, a passionate journalist with a deep-rooted interest in current affairs. I have more than five years of experience in the media industry, working both as an author and editor for 24 Instant News. My main focus lies in international news, particularly regional conflicts and political issues around the world.
