Musk wins legal battle over 2018 Tesla pay package

Tesla chief executive Elon Musk on Friday prevailed in a years-long legal battle over a massive pay package dating back to 2018.

The roughly 304 million shares are worth just over $146 billion at current prices. The Supreme Court of the US state of Delaware overturned a lower-court ruling that had voided the pay package following a shareholder lawsuit, saying scrapping the entire award had been an excessive measure.

Musk was granted the right in 2018 to acquire the shares in 12 tranches if Tesla met ambitious targets over a period of up to 10 years. The electric carmaker reached the benchmarks far sooner than expected. At the time, the package was valued at more than $50 billion.

A shareholder had challenged the compensation package at Tesla's then headquarters in Delaware and a judge ruled in early 2024 that the award had been unlawful.

She argued that Musk had exerted too much behind-the-scenes influence in negotiations with the company's board and that this had not been adequately disclosed to shareholders. Musk responded by moving Tesla's official corporate headquarters from Delaware to Texas.

The case took an unusual turn after Tesla shareholders reapproved the 2018 package at an annual meeting in June 2024, this time with greater disclosure following the high-profile court proceedings. The judge nevertheless upheld her rejection. Tesla appealed the ruling in Delaware and has since raised the threshold for similar shareholder lawsuits.

In light of the legal dispute, Tesla in August offered Musk the prospect of a replacement package of 96 million shares, which he would have been able to acquire after two years at $23.34 per share - the same price as under the original 2018 award. Tesla stipulated, however, that the replacement grant would be void if the original package were reinstated by the courts.

In November, Musk was also offered the prospect of a new, huge stock package valued at up to $1 trillion. In total, he could receive up to 423.74 million Tesla shares in 12 tranches, most of them linked to additional $500-billion increases in the company's market capitalization.

One of the targets requires Tesla to reach a market value of at least $8.5 trillion within 10 years. Other conditions include Musk remaining in the top executive role for the decade, Tesla operating 1 million robotaxis and delivering 1 million AI robots.

Musk has become the first person to reach an estimated net worth of more than $600 billion, according to calculations by Forbes magazine published on Monday.