© Reuters. FILE PHOTO: Elon Musk, Chief Executive Officer (CEO) of SpaceX, Tesla and Twitter, arrives for a hearing regarding his Tesla package at the Delaware Supreme Court in Wilmington, Delaware, US, November 16, 2022. REUTERS/Evelyn Hockstein/File Picture
By Tom Hals
WILMINGTON, Del. (Reuters) – After five days of testimony, including three hours from Elon Musk, a Delaware judge will now decide whether Musk’s $56 billion payout from Tesla (NASDAQ: ) Inc was justified by the company’s growth or misguided. .
Musk and the Tesla executives who were identified as defendants have repeatedly testified that the package achieved what it intended to do – to bring 10 times the growth of the company’s stock, enriching investors and Musk.
“We thought that if we could pull this off, if this plan was implemented, Tesla would be one of the most important companies in technology,” Antonio Gracias, a member of Tesla’s board from 2007 to 2021, told the Delaware Supreme Court on Wednesday. “It was very good for the shareholders.”
The lawsuit seeks to resolve the claims of shareholder Richard Tornetta that the 2018 salary package was ordered by Musk, the richest man in the world, to the directors and approved by a vote of shareholders who were misled by Tesla.
The lawsuit ended on Friday, with Musk struggling to manage the chaotic restructuring Results Twitter Inc (NYSE:), which he was forced to pay for $44 billion in separate lawsuits before the same judge, Chancellor Kathaleen McCormick (NYSE:).
“My sense is that even if it went to trial, the verdict would be in Mr. Musk’s favor,” said Eric Talley, a professor at Columbia Law School who followed the case.
It will be months before McCormick is sentenced and his decision could be appealed to the Delaware Supreme Court.
During the week-long test, regulators said the payments were designed to ensure Musk steered the electric car maker through a difficult phase when he could have focused on his rocket company SpaceX or tunneling venture The Boring Co.
Musk told the group that he wanted a large package to support his dream of going to Mars, or as he testified, to create “multi-species life to ensure the long-term survival of consciousness.”
Musk outlined his efforts to push the company from the brink of failure in 2017 to greater growth. “The amount of pain, no words can describe it,” Musk said Wednesday.
Gracias recalled that Musk celebrated his birthday in a factory conference room with a grocery store cake. “This was all manual, 24/7, brutal,” he told the court.
The package allows Musk to buy 1% of Tesla’s stock at a very low price each time it is rising and financial goals are being met. Otherwise, Musk gets nothing.
Tesla has hit 11 out of 12 goals as its value rose slightly to over $1 trillion from $50 billion.
Tornetta wants the plan terminated and the stock provided under the plan returned to Tesla.
Most of those efforts focused on what was presented to shareholders before they approved the plan. Tornetta’s lawyers tried to show Tesla hid that the package’s three goals could be quickly met.
The plaintiff presented the directors as close friends or businessmen of Musk, who were the link of their wealth.
Executives tried to show they could hold a line against Musk’s demands. But the proof of the financing was limited to the best accounting method for financing and the requirement that Musk keep his stock for five years.
“It wasn’t a drag, it wasn’t a drag,” Todd Maron testified at a salary negotiation in 2017 when he was general counsel.
Talley said Musk is an exceptional CEO and his salary reflects that.
“He’s like a Labrador retriever. He sees the ball and runs after it. You could almost make the argument they didn’t pay him enough because he ran after Twitter.”