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Elon Musk loses $56 billion pay package lawsuit, victorious attorneys demand $6 billion in Tesla stock as compensation

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Elon Musk loses $56 billion pay package lawsuit, victorious attorneys demand $6 billion in Tesla stock as compensation

According to a report by the Financial Times, shareholders' attorneys who defeated Elon Musk's $56 billion Tesla compensation plan are seeking nearly $6 billion worth of Tesla stock as their reward from a Delaware court.

Elon Musk's $56 Billion Compensation Plan Cancelled

According to previous reports, Elon Musk has not been taking a fixed salary since 2018. Instead, he receives rewards in the form of performance bonuses and stock options split into phases based on the company's long-term goals. When milestones are met, Musk can purchase Tesla shares at $23.34 per share, with a 5-year lock-up period.

Due to Musk consistently hitting targets every year, he currently owns 12.9% of Tesla's stock, valued at $102.1 billion, as reported by CNBC.

How does Tesla make money? Where does Musk's lucrative compensation come from?

However, Tesla shareholders have been somewhat dissatisfied with Musk's previous acquisition of Twitter, feeling that he has not been able to focus enough on Tesla's operations. This dissatisfaction led to a legal battle, culminating in shareholders demanding the court revoke the 2018 compensation plan awarded to Musk by Tesla's board of directors.

Judge Kathaleen McCormick ruled last month to revoke the 2018 compensation plan awarded to Musk by Tesla's board of directors, which included multiple batches of stocks worth approximately $56 billion upon achieving positive operational and financial milestones. The judge found that Tesla's board was not sufficiently independent, too influenced by Musk, and that the governance process of allocating funds and stock values was "unfair" to other shareholders.

Lawyers Demand Nearly $6 Billion in Tesla Stock as Compensation

The lawyers handling the lawsuit, Bernstein Litowitz Berger & Grossmann, stated in documents submitted to the Delaware court last Friday that the absolute value of this ruling is "unprecedented." They are requesting 2.9 million Tesla shares, equivalent to 11% of the 2.67 billion shares Musk received, valued at around $5.9 billion, as compensation. They also mentioned that paying in stocks could help Tesla reduce taxes.

The document stated:

The benefit of this structure is to directly link rewards to the benefits created and avoid taking a penny from Tesla's balance sheet to pay for expenses. We are ready to enjoy our feast.

Musk Plans to Relocate Other Companies to Another State, Expected to Appeal Again

Upon hearing the news, Musk disdainfully commented:

Lawyers who have done nothing but harm Tesla want $6 billion. Truly criminal!

Following the court's ruling, Musk lodged a complaint with the Delaware Court of Chancery and advised other companies to relocate their registrations to another state. Subsequently, he moved the registrations of his two companies from Delaware to Texas and relocated Neuralink to Nevada.

However, legal battles are nothing new for Musk. He was previously sued by investors over Dogecoin, and recently filed a lawsuit against OpenAI and its founder, Sam Altman, claiming it has become a subsidiary of Microsoft, solely profit-driven. It is expected that Musk will appeal the ruling on his compensation plan.

Musk, known for his focus on making money, sues OpenAI and Sam Altman, demanding a return to open-source principles.