Musk launches appeal to restore $56 billion Tesla payday
WILMINGTON, Delaware, March 11 (Reuters) - Elon Musk kicked off his appeal to try to restore his $56 billion payday from Tesla on Tuesday, claiming a lower court judge made multiple legal errors in rescinding the record compensation.
The 2018 pay package resulted in spectacular growth for the electric vehicle maker and yet it was determined by the lower Court of Chancery to be unfair to shareholders, who voted twice to approve the plan, Musk argued.
"That counterintuitive result defies settled principles of Delaware law, sound corporate governance, and common sense," said the opening appeal brief by Musk and the current and former Tesla directors who are defendants in the case.
In January 2024, Chancellor Kathaleen McCormick rescinded the pay package of stock options, calling it"unfathomable." She said it was unfair to Tesla shareholders because the directors who approved it were beholden to Musk and Tesla withheld key information from investors before they voted to approve it.
In June, Tesla got shareholder approval for the pay package for a second time, but the judge rejected that as grounds for reversing her ruling.
The pay package had awarded Musk options to buy around 303 million Tesla shares at around $23 each if the company hit performance and valuation goals. Tesla stock closed Tuesday at $230.58.
Tesla has said creating a new pay package of similar value could result in a charge of $25 billion, making the appeal an important avenue for restoring Musk's compensation and keeping his attention on Tesla.
Musk has said that he wants a greater stake in Tesla or he might develop products outside of the company. The appeal comes as he is dedicating time to President Donald Trump's government efficiency effort, known as DOGE, which has sparked demonstrations outside Tesla dealerships. The stock has fallen sharply in recent weeks.
In the appeal brief, Musk and the other defendants said McCormick wrongly applied a very difficult legal standard known as entire fairness to assess the pay package.
She arrived at that standard by finding Musk, who owned 21.9% of the stock at the time the board approved the pay package, controlled the pay negotiations, according to the brief. In addition, she wrongly determined that ordinary business relationships among directors made them conflicted and she erroneously faulted Tesla's disclosures ahead of the 2018 shareholder vote, according to the brief.
Applying the entire fairness standard amounted to granting a "license to sue" to Tesla shareholders, the brief said. The lawsuit was brought by Richard Tornetta, a Tesla investor who owned nine shares when he filed the case in 2018. The lawsuit benefits Tesla, not Tornetta, in what is known as a derivative suit.
Musk blasted the pay decision and has encouraged other companies to follow Tesla and SpaceX and reincorporate out of Delaware. A handful have left the state or said they might, including Meta Platforms, opens new tab (META.O), opens new tab, TripAdvisor (TRIP.O), opens new tab and Trump's media company.
Fears that a trickle of companies will turn into a stampede, which has been dubbed "DExit," prompted the state's legislature to consider amending its corporate law to better protect controlling shareholders from lawsuits.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
27 minutes ago
- Reuters
China says it will remove all tariffs on African exports to boost trade
NAIROBI, June 12 (Reuters) - China will negotiate and sign a new economic pact with Africa that will get rid of all tariffs on the 53 African states it has diplomatic ties with, it said, a move that could benefit middle-income nations. The Asian economic giant offers duty- and quota-free market access to least developed countries (LDCs), including many in Africa, but the new initiative will level the playing field by also offering middle-income countries similar market access. "China is ready to... welcome quality products from Africa to the Chinese market", China's foreign ministry said after a meeting of senior Chinese officials with African foreign ministers in Changsha to review implementation of commitments made during a summit in Beijing last September. In recognition of the significant disadvantages that businesses from LDCs like Tanzania or Mali could face from their more developed counterparts like South Africa once the market is fully opened, China pledged additional measures to support LDCs, including training and marketing promotion. Beijing's move could help relatively advanced countries, with significant manufacturing bases for value added products, to take advantage of the vast Chinese market, analysts said. "It enables middle-income countries like Kenya, South Africa, Nigeria, Egypt and Morocco... to be able to now enter the Chinese market duty-free," said Hannah Ryder, founder of Development Reimagined, an Africa-focused consultancy. Trade between China and Africa has been growing in recent years, but it has been heavily skewed in favour of China, which had a surplus of $62 billion last year. "Unless we have an equivalent increase of African exports to China, then trade deficits will continue to increase," Ryder said, adding that the initiative announced by Beijing could help to balance trade. During last year's summit in Beijing, China pledged 360 billion yuan ($50 billion) to African economies over three years in credit lines and investments, marking its return to big-ticket funding deals for the continent after a pandemic-related hiatus. ($1 = 7.1747 Chinese yuan renminbi)
Reuters
32 minutes ago
- Reuters
German defence minister: not considering sending Taurus missiles to Ukraine
BERLIN, June 12 (Reuters) - German Defence Minister Boris Pistorius said on Thursday that Germany is not considering delivering Taurus cruise missiles to Ukraine despite Kyiv's repeated requests. Although Germany is one of Ukraine's main military backers, Berlin has never supplied Taurus missiles, which have a range in excess of 300 miles (480 km). Answering a journalist's question during his fifth visit to Kyiv since the start of the war, Pistorius said, "Since you asked me whether we are considering this, my answer is no." In the same news conference, the minister said his country's military support for Ukraine had reached 7 billion euros ($8.12 billion) this year and a further 1.9 billion euros were pending parliamentary approval. ($1 = 0.8621 euros)
Daily Mirror
36 minutes ago
- Daily Mirror
Huge row as Tories demand watchdog probes Reform over data grab
The Tories have called on the Information Commissioner's Office (ICO) to look into a 'cyber-security disaster waiting to happen' affecting Reform-controlled councils Nigel Farage's Reform must be probed over a "cyber-security disaster waiting to happen", the Tories have demanded. The Conservatives have called on the information watchdog to launch an investigation into their right-wing rivals, who have asked for a mountain of data from councils it controls. This includes information on whistleblowers and the names and addresses of people who receive meals on wheels. The Tories also accuse Mr Farage's underlings of risking the amount of cash foster carers receive becoming public. In a letter to the Information Commissioner's Office (ICO), shadow communities secretary Kevin Hollinrake lashed out at "unauthorised data transfers". He warned taxpayers could be landed with massive bills if Reform is fined for breaking the law. It comes after Mr Farage's party said it would use a "unit of software engineers, data analysts and forensic auditors" to trawl council finances to find waste. Mr Hollinrake wrote: "I believe that the scale of such unauthorised data transfers across local government is a cyber-security disaster waiting to happen. READ MORE: Rachel Reeves pumps cash into NHS with 4million more tests and procedures to cut waits "There is a strong public interest in the Information Commissioner taking pro-active steps to investigate and, if necessary, issue enforcement notices against the public authorities and Reform UK Ltd. "I also suspect that council staff would welcome the support of the Information Commissioner, given the clear threats to sack them if they sound the alarm on breaches of the law. It is also not in the financial interests of local taxpayers for their council to be exposed to the liability of fines for breaching the law." The Tories went on to claim there is a "lack of legal basis" for Reform's data requests. Reform has launched its own Department of Government Efficiency (Doge) modelled on the chaotic department Elon Musk headed in the US. In a letter to Kent County Council signed by Mr Farage, Reform's head of Doge Zia Yusuf and its new council leader Linden Kemkaran, the party said its team of analysts was "bound by data protection obligations and professional standards". It also warned: "Should you resist this request, we are ready to pass a council motion to compel the same and will consider any obstruction to be gross misconduct. We trust this will not be required." Reform won control of 10 councils in the May elections, which also include County Durham, Derbyshire, Doncaster, Lancashire, Lincolnshire, North Northamptonshire, Nottinghamshire, Staffordshire, and West Northamptonshire. The party also won the inaugural regional mayoral contests in Greater Lincolnshire, and Hull and East Yorkshire, and has minority control of several councils. Reform's head of Doge Mr Yusuf claimed the Conservatives "were desperate to cover up the corruption and waste of their now deposed local government regimes". He added: "It will not work. "Just as they plundered hundreds of millions from the British taxpayers during Covid, they have done the same at councils. Reform councillors were voted in to expose it, and with the help of Reform's Doge team, they will do just that."
