The last two weeks have kept the world’s richest person Elon Musk busy with the revamping of newly bought Twitter.
While Musk was able to complete the $44 billion Twitter takeover just in time before the court’s 28th October deadline, it seems that the billionaire has to defend himself again in the court this week. But this time, it’s against a Tesla shareholder.
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Later this week on November 14th, Elon Musk needs to defend his record $56 billion Tesla pay package against claims that it unjustly enriches him without requiring his full-time presence at the carmaker.
Richard Tornetta, a Tesla shareholder is seeking to revoke Musk’s 2018 pay deal, claiming the board set easy performance targets and that Musk created the package to fund his dream of colonising Mars, as per Reuters report.
Musk’s Tesla, on the other hand, has countered that the package delivered an extraordinary 10-fold increase in value to shareholders.
The trial begins November 14th and will be decided by Kathaleen McCormick on Delaware’s Court of Chancery, who oversaw Twitter’s lawsuit against Elon Musk that ended last month when he agreed to close his $44-billion deal for Twitter, an acquisition which he financed largely with his Tesla stock. Elon Musk has sold Tesla stock three times this year, twice amidst the Twitter deal deadlock and recently once after the Twitter takeover.
Some legal experts reportedly think that this lawsuit by Tesla shareholder Richard Tornetta is going to be much more difficult than Twitter’s case against Elon Musk.
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Tesla’s ‘Part-Time CEO’
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Tesla shareholder Richard Tornetta’s lawyers argue that the 2018 package failed its stated purpose of focusing Elon Musk on Tesla. They portray Musk as a “part-time CEO,” citing his testimony that in 2018 he worked Tuesday, Wednesday and Friday at Tesla and Monday and Thursday at his rocket company SpaceX, according to his deposition, the report mentioned.
According to the lawsuit, Tesla’s board chair Robyn Denholm said the “minimal time” Musk was at Tesla was “becoming more and more problematic” in a 2018 email to Gabrielle Toledano, who at the time was the Tesla Chief People Officer.
Tesla has reportedly argued the package was not about requiring Elon Musk to punch a clock and be on site specific hours each week, but to hit “audacious” targets, thus enriching Musk but also shareholders like Tornetta.
The disputed pay package allows Musk to buy 1% of Tesla’s stock at a deep discount each time escalating performance and financial targets are met; otherwise Elon Musk gets nothing. Tesla has hit 11 of the 12 targets as its value ballooned to $650 billion from $50 billion on the back of ramped-up Model 3 production, according to court papers.
The trial is likely to focus on Tesla shareholder Tornetta’s claims that the $56 billion pay package was developed and approved by directors beholden to Musk, as per the report, and promoted to shareholders without revealing the first tranches were probable of being met based on internal projections.
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