Back in 2018, when Tesla was worth $57 billion, 73% of the shareholders voted to give Elon Musk a compensation package that was roughly equivalent to 12% of the company if he could lead Tesla to hit an extremely difficult market cap and several revenue milestones.
And against all odds, the mad lad pulled it off. Tesla's value hit a whopping $1-trillion dollars at one point, and stockholders have been nothing but ecstatic about their windfall.
But one stockholder (who holds 9 shares) did not want to share that windfall with the man who steered the ship. He thought Musk's compensation package was too generous. The stock options that Elon Musk was entitled to are worth $55.8 billion after all (that's roughly the value of the entire company in 2018).
So he sued.
And a Delaware judge just ruled in his favor.
Kathaleen St. Jude McCormick, the chief judge of Delaware's Chancery Court, said,
The incredible size of the biggest compensation plan ever - an unfathomable sum - seems to have been calibrated to help Musk achieve what he believed would make 'a good future for humanity.'
Swept up by the rhetoric of 'all upside,"'or perhaps starry eyed by Musk's superstar appeal, the board never asked the $55.8 billion question: Was the plan even necessary for Tesla to retain Musk and achieve its goals?
Funny, I would think the $55.8 billion question would have been: Is it possible for Musk to reach the financial targets?
If he had failed, he would have received $0 in compensation.
Instead he turned Tesla into a $1-trillion company and made Tesla shareholders millionaires and billionaires several times over (unless you only bought 9 shares, but even then, you'd be a thousandaire, which is better than you would have been without Musk).
Elon Musk was non-plussed but was remarkably even-keeled in his response.
I suppose he's used to the antics of judge Kathaleen St. Jude McCormick. This is not the first time she's ruled against him.
She was also the judge in the Twitter case, which resulted in him buying Twitter for his original $44-billion offer.
Reactions from shareholders have not been great as Tesla stock has fallen almost 3% in the premarket after the news.
Musk can still appeal the decision.
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