Lawyers Halt Elon Musk’s $56 Billion Pay Deal, Seek 29 Million Tesla Shares For Fees

Lawyers for a Tesla Inc. investor who successfully challenged Elon Musk’s $55.8 billion compensation package have requested to be compensated with around $6 billion in Tesla stock.

Tesla investor’s attorneys filed a plea in Delaware state court on Friday to dispute Musk’s executive remuneration award, which was the largest ever paid to a corporate leader.

In a court filing, attorneys representing shareholder Richard Tornetta asserted that they are entitled to more than 29 million Tesla shares. They discussed why they prefer stocks over cash.

“We are prepared to ‘eat our cooking,'” the lawsuit states. “This structure has the advantage of directly linking the award to the benefit created, avoiding taking even a single cent from Tesla’s balance sheet to pay fees.” It is also tax deductible for Tesla.”

Musk responded late Friday on his social media site, X. “The lawyers who did nothing but damage Tesla want $6 billion,” he said in a statement. “Criminal.”

Tesla, headquartered in Austin, is one of the world’s most valuable corporations, having a market capitalization of $645 billion.

Ann Lipton, a business law professor at Tulane University, stated that it is the largest legal fee request she has ever heard of.

“Now, to be fair, the case involved the largest compensation award ever to an executive,” she went on to say.

Lipton had her own hypothesis about why lawyers prefer stocks.

“I assume the plaintiffs’ attorneys figured if they sought $6 billion in cash in fees it could cripple Tesla,” she went on to say. “Because the case involved a stock award to Musk, they thought it would be appropriate to request the fee in shares so it wouldn’t be as difficult for Tesla shareholders.” That makes a lot of sense for me.”

According to the filing, Tornetta launched the complaint on behalf of shareholders, therefore about 267 million shares promised to Musk in his pay plan will be restored to Tesla as a result of the investor’s success.

The filing is the latest step in finalizing Delaware Chancery Court Chief Judge Kathaleen St. J. McCormick’s conclusion that Tesla board provided Musk with excessive compensation due to conflicts of interest. The judge also criticized Tesla’s public disclosure of the remuneration package.

Musk has 30 days to appeal McCormick’s final verdict in the matter under Delaware law.

Musk has indicated to Tesla’s board that he would like to organize another major stock award for himself, years after selling a large portion of his shares in the firm to acquire the social-media startup formerly known as Twitter.

The billionaire is “uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control.” Some observers have questioned if Musk’s commitment to Tesla will be diminished without another massive salary payout. Tesla’s directors cited that fear in approving the package that McCormick cancelled in January.

Musk has also moved all of his companies, except Tesla, out of Delaware for incorporation reasons in the aftermath of McCormick’s decision. He has pushed other business owners to incorporate outside of the state, which still houses more than 70% of Fortune 500 companies.

The case is Tornetta v. Musk, 2018-0408, Delaware Chancery Court (Wilmington).

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