Tesla (NASDAQ:TSLA) is embroiled in a legal battle again after a Delaware judge reaffirmed her decision to block Tesla CEO Elon Musk’s $US56 billion ($86.6 billion) pay package, despite a shareholder vote in June supporting the compensation plan.
Personal fortune grows
Pay package notwithstanding, the billionaire techbro has plenty of other streams of revenue, amassing a staggering $US54 billion ($83.5 billion) in just since the November 5 election, Forbes magazine tells us.
The majority of this appears to be stock bumps for SpaceX and, yes, Tesla, in that time.
Chancellor Kathaleen McCormick (NYSE:MKC) of the Delaware Court of Chancery ruled that Tesla cannot ratify the package after the fact, citing procedural issues and material misstatements in Tesla’s proxy statement.
The compensation plan, originally approved as far back as 2018, granted Musk stock options tied to ambitious performance and valuation targets.
Tesla’s board argued that Musk met those targets but Chancellor McCormick maintained that he improperly influenced the board’s negotiations.
In her 101-page opinion, she wrote: “Were the court to condone the practice of allowing defeated parties to create new facts for the purpose of revising judgements, lawsuits would become interminable.”
Tesla plans to appeal the decision, with Musk criticising the ruling on his social media platform X, tweeting: “Shareholders should control company votes, not judges.”
Tesla’s shares dropped 1.4% in after-hours trading following the announcement.
Massive legal fees awarded
Chancellor McCormick also ordered Tesla to pay $345 million in legal fees to the attorneys who challenged Musk’s pay package – one of the largest fee awards in securities litigation.
While the sum is far less than the $6 billion initially requested, the plaintiffs’ attorneys expressed satisfaction with the ruling.
Tesla shareholders expressed concerns that the ruling could prompt Musk to shift his focus away from the company.
Meanwhile, the company’s legal woes could continue for another year if the appeal proceeds.