Elon Musk scored a major win after Tesla awarded him with a new $29 billion stock compensation package today. Musk's previous pay package, worth $50 billion, was struck down by the court, forcing him to shift Tesla's headquarters from Delaware to Texas. In its 8K SEC filing, the board notes that it hopes that the pay package will entice Musk to stick around at Tesla as he divides his time among multiple business ventures, including artificial intelligence and space exploration.
Elon Musk's Stock Option Grant Contingent On Him Losing Delaware Court Case
Musk's original stock award plan, approved by Tesla in 2018, was worth $55.8 billion and spread over the course of 10 years. At the time of its award, Tesla's board had also argued that it aimed to keep Musk from leaving Tesla and focus on his other ventures instead. However, the pay package hit a roadblock when a Tesla shareholder, Richard Tornetta, sued Tesla's board and Musk and argued that the board had violated its fiduciary duties in the award.
Musk was dealt a setback in 2024 when a judge voided his pay package and called it excessive, as well as termed the proxy statements to shareholders as misleading. Following the decision, Musk decided to relocate Tesla from Delaware to Texas, and Tesla's shareholders reapproved the package with a 77% vote later during the year.
As part of its decision, the court wondered whether Musk's stake in Tesla created undue pressure over Tesla shareholders to approve the deal, and its decision led to questions of whether Tesla's shareholders were intimidated by him or if they voted in the package's favor due to the executive's star status.
While the original grant's case is still in court, Tesla decided to award Musk with another $29 billion award today. This award will vest in two years and is contingent on Musk either being Tesla's CEO or being responsible for developing products.
Crucially, the award is also dependent on the outcome of the pending legislation in court. Tesla's SEC filing notes that the award "will be immediately forfeited and returned to the Company if, prior to vesting, there is a final, non-appealable judgment, order or decision of the Delaware courts" regarding the original case or pending or future appeals which result "in Mr. Musk becoming able to exercise in full the performance-based stock option award he was granted in January 2018 (the “2018 CEO Award”).
The award also adds a no 'double dip' clause, which prohibits Musk from receiving shares in excess of the 2018 award if the court rules in his favor and the original stock award is granted before vesting. The clause also requires him to repay excess shares under the 2025 grant to Tesla if the court awards him the 2018 award after the 2025 award is vested. The executive will also have the option to forfeit his 2018 award under the clause.
About the author: Ramish is a seasoned technology writer and editor with more than a decade of experience. He specializes in semiconductor fabrication and market analysis. With a background in finance and supply chain management - via his bachelors in Finance and a micromasters in supply chain management from MIT - Ramish combines financial rigor with deep industry insight to deliver accurate and authoritative coverage.
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