A judge in Delaware has ruled that Tesla cannot give Elon Musk a huge $56 billion payment for his work as CEO, even though many Tesla shareholders said they supported it. After the judge’s decision in January, Musk told Tesla’s board he wants a new pay package that’s almost as big. He also mentioned on social media that he might want more shares in Tesla or could think about making new products with his other companies, like SpaceX and Neuralink.
Can Tesla Appeal?
Musk and Tesla might decide to appeal the judge’s ruling, trying to change the decision at the Delaware Supreme Court. This process usually takes about a year. The case is unique and has some tricky legal details because Musk, even with only about 22% of Tesla’s shares, was seen as controlling the pay discussions.
Creating a New Pay Plan
Tesla’s board could come up with a new pay package, but it could be very costly. The original deal from 2018 gave Musk stock options that would only be valuable if Tesla met high goals—and Tesla did meet those goals, causing the stock to rise a lot. The company said that making a new plan that costs as much as the original might need to be more than 90% smaller.
Bringing Back the Old Plan?
Tesla could just give Musk the same stock options from 2018 again, but doing so might cause other problems. If shareholders want to challenge this decision, they would have to take the matter to Texas courts, as the company moved its headquarters. However, returning to the old plan would lead to a massive $25 billion charge for Tesla. This money would also be taxed heavily when Musk uses the options, resulting in a potential 57% tax rate.
Could They Settle?
Musk might think about settling the lawsuit brought by a Tesla shareholder and accept less money, but this goes against his usual strategy of fighting cases in court.
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