Musk Wins Appeal on 2018 Tesla Pay Deal
Elon Musk won a major legal victory on Friday after the Delaware Supreme Court restored his 2018 compensation agreement with Tesla. The court overturned a lower court ruling that had struck down the deal nearly two years ago.
Previously valued at $56 billion, the pay package is now worth about $139 billion. This valuation is based on Tesla’s closing share price on Friday.
Supreme Court Reverses Earlier Decision
In its ruling, the Supreme Court said the 2024 decision to cancel the entire pay package was improper. The court also said the ruling treated Musk unfairly.
According to the judges, the earlier order left Musk without compensation for six years of work. As a result, the court reversed a decision that had triggered sharp criticism from Musk and raised concerns about Delaware’s image as a business-friendly state.
Musk’s Control Over Tesla Strengthened
With the deal restored, Musk gains greater control over Tesla. He has repeatedly said control, not just pay, remains his main priority.
If Musk exercises all stock options from the 2018 package, his stake in Tesla would rise from about 12.4% to 18.1%. Moreover, the options cover roughly 304 million shares, representing nearly 9% of Tesla’s outstanding stock. Tesla granted these options only after performance targets were met.
Effect of New Compensation Plan
Meanwhile, Tesla shareholders approved a new compensation plan in November. If ambitious targets are achieved, that package could be worth up to $878 billion.
However, the Supreme Court’s ruling removes the risk of a potential $26 billion profit hit. Tesla could have faced that loss if the appeal had failed. Following the decision, Tesla shares rose by less than 1% in after-hours trading.
Reactions From Musk and Legal Challengers
After the ruling, Musk posted on X that he had been “vindicated.” However, Tesla did not immediately respond to requests for comment.
At the same time, lawyers who challenged the pay deal said they were reviewing their next steps. Nevertheless, they defended their role in holding Tesla’s board accountable for fiduciary duties.
How the Legal Battle Began
The dispute began shortly after shareholders approved the 2018 pay plan. Investor Richard Tornetta later sued Tesla’s board, alleging governance failures.
In 2024, Delaware Judge Kathaleen McCormick ruled that Tesla’s directors faced conflicts of interest. She also said shareholders had not received full information. Therefore, she ordered the pay deal to be rescinded.
Delaware Faces Criticism
Following that ruling, Musk criticized Delaware courts and accused them of being hostile to tech founders. Consequently, he urged companies to reincorporate elsewhere.
As a result, firms such as Dropbox, Roblox, Trade Desk, and Coinbase moved their legal homes to Nevada or Texas. Even so, Delaware remains the most popular legal domicile for U.S. public companies.
Tesla Reincorporates in Texas
Tesla has since reincorporated in Texas. Under Texas corporate law, investors must own at least 3% of company shares to file certain lawsuits.
That threshold equals roughly $30 billion at current prices. Therefore, Elon Musk remains the only individual shareholder who meets this requirement.