By Sarah Williams and David Richards
April 25, 2024, 12:15 AM GMT+5
Updated 45 min ago
Elon Musk at the AI Safety Summit
Tesla's CEO Elon Musk addressing the media at the AI Safety Summit held at Bletchley Park, Britain on November 1, 2023. (Photo: Leon Neal/Pool via REUTERS/File Photo)
WILMINGTON, Delaware - An investor in Tesla, who earlier won a case to invalidate Elon Musk's $56 billion compensation deal, has approached a Delaware court to block the company from sidestepping the court's decision by shifting its legal base to Texas.
Legal Battle Over Musk's Compensation
Richard Tornetta's legal representatives have submitted a request to Delaware Chancellor Kathaleen McCormick to address this issue before Tesla's annual shareholder meeting on June 13. The meeting is set to include a vote on relocating Tesla's incorporation to Texas and endorsing Musk's 2018 compensation package.
The plaintiff's legal team stated, "The defendants should not evade the jurisdiction and nullify years of legal proceedings merely due to dissatisfaction with the verdict."
Tesla, incorporated in Delaware for over two decades, has stipulated that legal disputes involving shareholders be settled within the state.
Court's Ruling on Musk's Compensation
Earlier this year, Chancellor McCormick nullified the $56 billion compensation plan, labeling it "incomprehensible." She determined that the stock option agreement was brokered by a board that lacked autonomy from Musk and that essential details were concealed from shareholders during a 2018 vote.
Musk has publicly criticized Delaware's legal system post the ruling, suggesting that the state, housing a majority of major publicly traded companies, is attempting to dissuade corporations from relocating.
Tesla's Legal Strategy
To reinstate the contested pay package, Tesla is employing a less common legal strategy, seeking shareholder "ratification" of Musk's 2018 compensation. This approach could serve as an incentive for Musk and might offer Tesla a counterargument against the $6 billion in legal fees sought by Tornetta's legal team.
Shareholder Concerns and Tesla's Future
The legal challenge by the shareholder coincided with Tesla's optimistic sales projection and its announcement of plans to introduce more affordable vehicle models by early 2025. This news alleviated concerns about the company's growth trajectory, leading to a more than 10% surge in Tesla's stock price in early trading on Wednesday.
Conclusion
The unfolding legal saga holds significant implications for Tesla and its stakeholders. The Delaware court's decision could shape Tesla's future direction and the resolution of Elon Musk's compensation.
