A Delaware judge ruled Monday that Tesla CEO Elon Musk is still not entitled to $56 billion in compensation, despite the electric vehicle company’s shareholders voting in June for his reinstatement.
The decision by Chancellor Judge Kathaleen McCormick of the Court of Chancery follows her January ruling that called the pay package excessive and struck it down, surprising investors and sowing uncertainty over the Musk’s future at the world’s most valuable automaker.
In an article on X after the ruling, the 52-year-old tech billionaire said “shareholders should control the company’s votes, not judges.”
In a statement on X, Tesla said: “The decision is wrong and we will appeal. »
He added that the judge had overturned a decision by a qualified majority of shareholders.
Musk and Tesla can appeal to the Delaware Supreme Court as soon as McCormick issues a final order, which could come as soon as this week. The appeal could take a year.
Tesla said in court that the judge should recognize its shareholders’ subsequent vote in June in favor of Musk’s pay package, the company’s driving force responsible for many of its advances, and reinstate his compensation.
McCormick said Tesla’s board was not authorized to press “reset” on restoring Musk’s pay package.
“If the court tolerated the practice of allowing defeated parties to create new facts for the purpose of revising judgments, lawsuits would become interminable,” she said in her 101-page opinion.
She said a ratification vote like the one used by Tesla must be held before trial and that a company cannot ratify a transaction involving a conflicted controller. She had determined that Musk was in control of salary negotiations.
She also said Tesla made several material inaccuracies in its proxy statement regarding the vote, and that it could not claim the vote was a “panacea” to justify reinstating Musk’s salary.
Tesla shares fell 1.4% in after-hours trading following the decision.
Gary Black, managing partner of The Future Fund, which owns Tesla shares, said on X that he thought the Delaware Supreme Court was more pragmatic than McCormick.
“I doubt this decision will be resolved in the near future, and it will likely be overturned by a more moderate court down the road,” he wrote.
The salary package provided for the granting of stock options to Musk if the company achieved its performance and valuation objectives.
While the price was initially valued at $56 billion, Tesla shares have surged 42% since November 5, when Republican candidate Donald Trump, backed by Musk, won the US presidential election. Following this recovery, the salary package is worth approximately $101 billion.
The move comes as Trump has charged Musk with creating a more efficient government by cutting spending. The role as co-head of the new Department of Government Efficiency would be informal rather than a government position, allowing Musk to keep his job at Tesla as well as run other companies, including rocket maker SpaceX.
Musk threw himself behind Trump’s election campaign and became a close advisor in the process.
McCormick also ordered Tesla to pay $345 million to the lawyers who brought the case, well short of the $6 billion initially sought but still one of the largest awards ever awarded in copyright litigation. securities. She said the fee could be paid in cash or Tesla stock.
“We are pleased with Chancellor McCormick’s decision to reject Tesla’s invitation to inject continued uncertainty into the legal proceedings,” Bernstein Litowitz Berger and Grossmann, one of the three law firms, said in a statement. of the complainant.
The law firm also said it looked forward to defending the court’s opinion if Musk and Tesla appealed.