In an unusual decision, a Delaware judge has voided Elon Musk‘s $55 billion pay package from the electric automaker Tesla, siding with a shareholder who sued claiming the sum was excessive.
The decision throws Musk’s enormous fortune into a cloud of doubt, with the 2018 pay plan making up a significant portion of his wealth. Were it completely voided, Musk would no longer be the world’s richest man, and would fall below Amazon founder Jeff Bezos and luxury goods mogul Bernard Arnualt.
Musk has subsequently sold tens of billions of dollars in Tesla stock, and also secured some of that stock against personal loans, both of which he has used to help fund his other businesses. That includes his $44 billion takeover of Twitter, now called X. That being said, the plaintiffs argue that the tranche of shares in question remain untouched.
In a post on X after the ruling was issued, Musk wrote “Never incorporate your company in the state of Delaware.”
In the ruling, Chancery Court Chief Judge Kathaleen St. J. McCormick wrote: “In the final analysis, Musk launched a self-driving process, recalibrating the speed and direction along the way as he saw fit. The process arrived at an unfair price. And through this litigation, the plaintiff requests a recall.”
“Plaintiff has demonstrated that rescission is reasonable, appropriate, and practicable,” McCormick wrote. “This Grant is not ‘too complex to unscramble[.] Rescission is uniquely available: no third-party interests are implicated, the entire Grant sits unexercised and undisturbed, and exercised shares would be subject to the Five Year Hold Period.”
“Defendants argue that rescission is a harsh consequence that would leave Musk uncompensated,” she continued. “But Musk’s preexisting equity stake provided him tens of billions of dollars for his efforts. And Defendants have not offered a viable alternative short of leaving the Grant intact.”
The judge also says that negotiations between Musk and the board were not adversarial in nature, with the board essentially giving Musk what he asked for, even though he was unlikely to leave the company had he not receive the pay package.
The ruling comes at the same time that Musk has publicly stated that he would like the board to authorize another pay package, one that would give him a larger ownership stake in the company.