Elon Musk’s $44 billion acquisition of Twitter is helping provide ammunition for an upcoming trial, where an investor will debate the CEO’s $56 billion salary package. Tesla Inc. is a waste of money failing to secure its full time services.
deal to Twitter Inc. And its ability to distract Musk from Tesla will play a significant part of the trial in October, according to a shareholder’s attorney.
The lawsuit alleges that Musk created the 10-year package and that Tesla’s board rubber-stamped it in 2018, without requiring the celebrity CEO to devote himself to the electric vehicle maker.
“Look at most CEO contracts. The first line, it says, is, ‘You are going to be a full-time CEO and devote a substantial amount of time to the business and affairs of the company.’ It’s the standard,” said Greg Varallo of Bernstein Litowitz Berger & Grossman, the firm leading the case against the wage deal.
Musk and Tesla did not respond to requests for comment. In court papers, the defendants contended that the plan was properly drafted by independent directors, approved by the shareholders, and has generated unprecedented profits for investors.
Tesla stock is down more than 20% since Musk revealed he had taken a 9% stake in Twitter on April 4, partly over concerns that were distracted by the electric vehicle maker’s supply chain problems.
In addition to Twitter, the multitasking entrepreneur is already president of rocket company SpaceX, founder of tunneling venture The Boring Company and owner of brain-chip startup Neuralink. His stated ambitions include colonizing Mars.
The 2018 Tesla Pay package gives stock options as the company meets rising financial goals, which the company said will encourage his continued leadership.
If Tesla meets all of the targets, described as “stretch” targets, the plan would be worth a minimum of $56 billion, although as Tesla’s stock rises, so does the value of the plan. .
According to Amit Batish of research firm Equilar, Musk’s stock is currently worth about $ 75 billion under this plan. He estimated that the 100 highest CEO salary packages from 2021 onwards are about 35 times the combined value.
The lawsuit by shareholder Richard Torneta in the Delaware Court of Chancery alleges that the package was unnecessary, as Musk owned 22% of Tesla at the time, giving him a lot of incentive to make the company a success.
Tornetta wants to cancel the plan including stock options already granted.
Musk is using his Tesla stock as collateral for a loan to buy Twitter.
Musk and Tesla directors argued in court filings that the pay package did what it set out to do — align Musk’s incentives with those of shareholders and create value.
“Since it was implemented, the value of Tesla has grown by more than 1,800% from approximately $53 billion to more than $1 trillion,” the filing said. He noted that despite the huge increase in price, Musk hasn’t reached all the milestones.
In March 2018 shareholders approved the package, which was called “challenging” in securities filings.
The lawsuit states that shareholders should have been informed prior to the vote that management knew certain milestones were likely to be achieved, which were described as materially misleading omissions.
Tesla countered in court papers that internal estimates were “stretch” targets.
Tesla’s former chief financial officer, Deepak Ahuja, according to the court filing, “nothing that Elon touches or does is bold and super stretched and not offensive.”
Despite the bizarre size of the pay, the test will likely change the way directors think in negotiating the package and what the board told shareholders ahead of the vote.
“No one could look into the crystal ball and see the status of Twitter,” said University of Connecticut School of Law professor Minor Myers. “But they could have negotiated some of Musk’s time at Tesla.”
The trial is scheduled to begin on October 24 in Wilmington, Delaware and last five days.
deal to Twitter Inc. And its ability to distract Musk from Tesla will play a significant part of the trial in October, according to a shareholder’s attorney.
The lawsuit alleges that Musk created the 10-year package and that Tesla’s board rubber-stamped it in 2018, without requiring the celebrity CEO to devote himself to the electric vehicle maker.
“Look at most CEO contracts. The first line, it says, is, ‘You are going to be a full-time CEO and devote a substantial amount of time to the business and affairs of the company.’ It’s the standard,” said Greg Varallo of Bernstein Litowitz Berger & Grossman, the firm leading the case against the wage deal.
Musk and Tesla did not respond to requests for comment. In court papers, the defendants contended that the plan was properly drafted by independent directors, approved by the shareholders, and has generated unprecedented profits for investors.
Tesla stock is down more than 20% since Musk revealed he had taken a 9% stake in Twitter on April 4, partly over concerns that were distracted by the electric vehicle maker’s supply chain problems.
In addition to Twitter, the multitasking entrepreneur is already president of rocket company SpaceX, founder of tunneling venture The Boring Company and owner of brain-chip startup Neuralink. His stated ambitions include colonizing Mars.
The 2018 Tesla Pay package gives stock options as the company meets rising financial goals, which the company said will encourage his continued leadership.
If Tesla meets all of the targets, described as “stretch” targets, the plan would be worth a minimum of $56 billion, although as Tesla’s stock rises, so does the value of the plan. .
According to Amit Batish of research firm Equilar, Musk’s stock is currently worth about $ 75 billion under this plan. He estimated that the 100 highest CEO salary packages from 2021 onwards are about 35 times the combined value.
The lawsuit by shareholder Richard Torneta in the Delaware Court of Chancery alleges that the package was unnecessary, as Musk owned 22% of Tesla at the time, giving him a lot of incentive to make the company a success.
Tornetta wants to cancel the plan including stock options already granted.
Musk is using his Tesla stock as collateral for a loan to buy Twitter.
Musk and Tesla directors argued in court filings that the pay package did what it set out to do — align Musk’s incentives with those of shareholders and create value.
“Since it was implemented, the value of Tesla has grown by more than 1,800% from approximately $53 billion to more than $1 trillion,” the filing said. He noted that despite the huge increase in price, Musk hasn’t reached all the milestones.
In March 2018 shareholders approved the package, which was called “challenging” in securities filings.
The lawsuit states that shareholders should have been informed prior to the vote that management knew certain milestones were likely to be achieved, which were described as materially misleading omissions.
Tesla countered in court papers that internal estimates were “stretch” targets.
Tesla’s former chief financial officer, Deepak Ahuja, according to the court filing, “nothing that Elon touches or does is bold and super stretched and not offensive.”
Despite the bizarre size of the pay, the test will likely change the way directors think in negotiating the package and what the board told shareholders ahead of the vote.
“No one could look into the crystal ball and see the status of Twitter,” said University of Connecticut School of Law professor Minor Myers. “But they could have negotiated some of Musk’s time at Tesla.”
The trial is scheduled to begin on October 24 in Wilmington, Delaware and last five days.