Delaware Judge Will Force Tesla to Pay Lawyers Billions

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Update on Elon’s $56B pay package case.

• Tesla and Elon Musk will appeal the ruling.
• Before Elon and Tesla can appeal, the two sides will propose a final order for approval by Judge McCormick, which will include a petition for a legal fee. That legal fee, which will be paid by Tesla, is expected to be one of the largest ever—if not the largest—legal fee ever paid in history (billions). Tesla will likely oppose it.
• The fee petition is expected to be filed by March 1. If that’s approved, Elon would have 60 days to file an appeal with the Delaware Supreme Court.
• An appeal is expected to take at least 6 months to resolve.

UPDATE

Tesla is negotiating with the Tesla shareholder and the lawyers. The discussion is to propose a delay to the legal fee decision until the appeal. This involves the appeal bond. IF Tesla is successful upon appeals, this would greatly reduce or eliminate the awarding of the legal fees.

An appeal bondis a payment that a court requires from an appellant when awaiting a judgment appeal. The bond’s purpose is to maintain the status quo during appeal. The surety insurer guarantees to the appellee that the surety will pay the appellee if the appellant is unable to do so if the judgment is affirmed.

The 2018 Shareholder Vote

The ruling was supposedly to protect Tesla shareholders. In 2018, Tesla shareholders approved a $56 billion pay package for CEO Elon Musk with 73% of their votes, excluding votes by Elon Musk and his brother Kimbal. The lawsuit was made by a Tesla shareholder with 9 shares of Tesla stock.

The ruling was that everyone did not know that they were agreeing to pay Elon about 1% of the company in options but only starting with more than doubling the value of the company. The rest would come with triple, quadruple up to 12X the value of the company. All of the media at the time said the goals were impossible.

Here is the SEC disclosure at the time.

The discussion at the time was only over the first target of the pay package.

If Tesla’s stock value never rises above $100 billion (right now it’s around $55 billion), Musk would receive no compensation for running Tesla over the next 10 years. On the other hand, if Tesla stock reaches a value of $100 billion—and the company either earns $1.5 billion in profits or generates revenues of $20 billion—Musk would get one percent of the company’s stock, an award worth $1 billion.

Making the shareholder 1000% return over 10 years when your P/E is already through the roof and you’re in a bluechip market segment? Yeah, if he actually hits the target the enrichment he gets will be well earned and he’ll have made anyone holding the stock quite wealthy.

The gains required for Musk to even end up with the basic 1% share rate are… rather staggering, even for a 10 year period.

And while ending up with stock valued $1 billion is a bizzaro ridiculous amount to get paid as a salary, when broken down to it being roughly $100 million per year… it’s still a ridiculous amount in general, but it’s not out of the realm of other top CEOs. Given that it requires some hefty performance figures, it’s already a performance based “bonus” effectively.

The real irony is that if they paid him a normal yearly salary plus bonuses that was similar to the top ranges of the above link, he’d be able to spend it all on stock purchases that would total more than 1%.

13 thoughts on “Delaware Judge Will Force Tesla to Pay Lawyers Billions”

  2. Delaware supreme court needs to reverse this ASAP or Delaware is going to lose 12% of their state budget. This is beyond stupid.

  3. One of the biggest scams in history, how layers easily got billions. Find someone to sue a corp and if got lucky then set your fee to billions. Sky is the limit. 10 billions or more?

    • Well Musk earned his money so there’s that. Maybe Ukraine should negotiate a way to get $60 billion from Tesla and get 73% of shareholder approval so that your inane comment is on topic.

      • People think I ask Musk to give his personal money. I was talking about comments from Musk who don’t want the $60 billion aid voted in congress or whatever. I guess Musk fanatics don’t follow politics.

        • Oh we follow politics just fine.

          $60 billion for Ukraine to protect their border is $60 billion more than the US will spend to protect its own border. Maybe money for Ukraine is good, maybe it is bad but money for the borders of other countries is secondary to our own border which is quite a disaster.

        • Jonathan, maybe people have been following you for awhile and are tired of the anti-Elon responses at every opportunity. As I remember Elon wanted peace and try peace talks for Ukraine instead of Biden admin never ever talking to Russia and funding nothing but war. That war btw has almost exclusively been fought on Ukraine soil with massive destruction there form weapons on both sides and the resulting loss of Ukrainian lives is staggering. Or if you listen to Putin both in history and in the recent Tucker interview you can clearly hear that NATO and the U.S. violated signed treaties which effectively was NATO / US declaring war on Russia. Putin did war the West several times and with Biden refusing to communicate with Russia in any way… well, we get war. But then again, you know this as you are not a “Musk fanantics (which) don’t follow politics”.

          • Your sooo right Melanie. Its completely Ukraines fault that Russia attacked a sovereign nation and murdered tens of thousands of Ukrainians. We should all trust Vladimir Putin. Hes a great man that always tells the truth, just like Trump. Putin’s just looking out for hard working folks like Tucker Carlson and yourself. He wants you to live a peaceful, freedom filed life, governed by incorruptible Russian hegemony. Vladamir is the hero, and Western Civilization is the enemy! Since the name Tokyo Rose is already taken maybe you could call yourself Moscow Melanie?

            • Cute strawman. You can hate Putin and also admit that things are a bloody stalemate in Ukraine. Hating Putin is compatible with thinking that our own country is a mess of our own politicians making.

              Ukraine is what happens when you let the State Dept. fight wars- you wait two years to get F-16’s to Ukraine, you wait 18 months to get ATACMS to Ukraine, etc. Its a battle of equally inept bureaucracies and whichever is slowest will lose.

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