Elon Musk's efforts to restore his massive $56 billion 2018 Tesla pay package rejected by a Delaware judge on Monday.
The decision, issued by Delaware Chancery Court Judge Kathleen St. J. McCormick, comes after a majority of Tesla shareholders voted in August. reauthorized Compensation packages during the electric vehicle maker's annual meeting.
After initially being approved in 2018, the pay package sparked a lawsuit from some Tesla shareholders, who accused Musk and Tesla's board of directors of breaching their duties and unjustly enriching the billionaire. In January 2024, McCormick had ruled Musk and his company failed to prove that the huge payment was legally required, leading Musk to take the issue back to his shareholders in August.
In his December 2 ruling, McCormick said Musk had asked the court “to reverse its decision and enter judgment in his favor.”
“The motion to amend is denied,” the judge said, citing “at least four fatal flaws” in Musk's lawyers' arguments.
McCormick said, “A large and talented group of defense companies got creative with the ratification argument, but their unprecedented principles run counter to many strands of established law.”
Tesla did not immediately respond to a request for comment.
Tesla shares fell slightly in after-hours trading, falling $4.74, or 1.3%, to $352.35. The stock has surged 47% in the past month, buoyed by investors' optimism that President-elect Donald Trump's victory in the election will help boost Tesla's prospects, given Musk support for his campaign,
The stock options given to Musk by Tesla were initially valued at $2.6 billion, but grew to $56 billion when McCormick halted the package in January. Bloomberg News,
“No basis in common law”
Musk's lawyers had argued that the second vote made it clear that Tesla shareholders, with full knowledge of the flaws in the 2018 process that McCormick previously revealed, were adamant that Musk deserved the pay package. He asked the judge to vacate his order directing Tesla to cancel the pay packages.
Among the issues in his latest arguments, McCormick wrote, was the lack of procedural grounds for “overturning the result of an adverse post-trial decision based on evidence created after the trial.”
He also objected to Musk's effort to re-certify the pay package through another shareholder vote, which he wrote his lawyers had argued serves as “common law ratification.” .
He said, “What defendants call 'common law ratification' has no basis in common law – a shareholder vote cannot stand alone and ratify a conflicted-control transaction.” ,[E]Even though a shareholder's vote could have a ratifying effect, it could not do so here because of several material misstatements in the proxy statement.”
McCormick also rejected an equally unprecedented and massive fee request from plaintiff lawyers, who argued they were entitled to legal fees in the form of Tesla stock worth more than $5 billion. The judge said the lawyers were entitled to a fee award of $345 million.
Despite the setback, Musk remains the world's richest person with a net worth of $343 billion, according to the Bloomberg Billionaires Index.
Contributed to this report.