In intraday trading on Wednesday, Tesla (TSLA) shares rebounded from previous losses after a Delaware court raised concerns over Chief Executive Officer (CEO) Elon Musk’s $55.8 billion compensation package, deeming it excessive.
The Chancery of the State of Delaware, an equity court handling disputes involving Delaware corporations, ruled in favor of an investor who challenged Musk’s compensation. The court highlighted the extraordinary scale of the plan, stating it to be “the largest potential compensation opportunity ever observed in public markets by multiple orders of magnitude.” This compensation plan dwarfs comparable peer plans, exceeding them by 250 times in magnitude, and surpasses Musk’s prior compensation plan by over 33 times.
The court’s directive requires the involved parties to collaborate on a final order that implements the decision. They are tasked with identifying all pertinent issues, including fees, to bring the matter to a resolution.
While the ruling is subject to appeal, it holds significant implications for Musk’s wealth. As the world’s wealthiest individual, with a net worth of $229 billion attributed to his Tesla stake and ownership of X (formerly Twitter), Musk stands to face substantial financial ramifications.
The court’s decision coincides with Musk’s recent statements on X, where he expressed his desire for a 25% voting control stake in Tesla to bolster the company’s position in the artificial intelligence (AI) arena. During Tesla’s latest earnings call, Musk reiterated his intention to exert a “strong influence, but not control” over the company before prioritizing AI endeavors.
Analysts at Wedbush suggested that Tesla’s board could appeal the court’s decision and devise a new compensation plan to replace the contested one. This new package could potentially grant Musk the desired 25% voting share. Moreover, the board might leverage this opportunity to solidify Musk’s commitment to Tesla and establish a new AI-focused corporate structure.
Despite the legal uncertainties, Tesla’s shares showed resilience, edging up by 0.1% to $191.74 per share as of approximately 12:50 p.m. ET on Wednesday. Over the past year, Tesla shares have recorded a gain of more than 10%.
