Delaware Court Blocks Elon Musk’s $55.8 Billion Bonus Payment

A Delaware court blocked Tesla’s payment of $55.8 billion in compensation to Elon Musk, which was provided for in an agreement between the company and Mr. Musk. Judge Katalin McCormick called the amount “unimaginable” and said paying it to Mr. Musk would be unfair to Tesla shareholders. The agency reports this Reuters.

The ten-year contract was concluded between Tesla and Elon Musk in 2018. Its terms provide for the payment of compensation to the company’s founder in shares of the company, depending on whether Tesla shares reach a certain level by a specified date.

Payments are made in tranches, each of which represents 1% of Tesla shares. The first tranche was carried out in 2020, when Tesla’s capitalization reached $100 billion, and further rewards are due for every $50 billion that increases Tesla’s capitalization. Tesla’s capitalization now exceeds $600 billion. Under the terms of the agreement, Elon Musk could receive an option to buy back about 304 million Tesla shares at a price of $23.3 per share, which is much more profitable than buying them at the current market price of $191.59.

According to Judge McCormick, the 2018 agreement between Tesla and Mr. Musk was accepted at the instigation of board members who were personally obligated to something by the head of the company, maintained close ties with him and did not have sufficient independence of opinion. Tesla’s board of directors, according to the judge, either being “carried away by Musk’s ‘everything is positive’ rhetoric or blinded by his superstar charm, did not even think to ask about this $55.8 billion.”

The court’s decision may be appealed by Elon Musk’s lawyers. He himself, in his characteristic manner, commented on the court’s decision on his social network account X as follows: “Never register your company in the state of Delaware.”

Alena Miklashevskaya