Tesla (TSLA) CEO Elon Musk launched an appeal yesterday to reinstate his $56 billion payday that dates back to 2018. Musk cited that the lower court judge made legal errors in voiding the pay package last year. Musk was entitled to receive stock options to buy roughly 303 million shares of Tesla at $23 apiece, conditioned on the company meeting some performance benchmarks and valuation goals, which the company met successfully.
Musk’s Massive Pay Package Is at Stake
The defendants in the case include Musk and Tesla’s current and former directors. In the opening appeal brief made yesterday, the defendants noted that the “counterintuitive result defies settled principles of Delaware law, sound corporate governance, and common sense.” The brief also notes that the judge incorrectly applied a very difficult legal standard called the “entire fairness” to assess the pay package, giving shareholders the right to sue.
Even though shareholders had approved the compensation plan twice, the lower court of Chancery ruled that the humongous package would be unfair to shareholders. In January 2024, Chancellor Kathaleen McCormick rejected the appeal calling it “unfathomable” and pointed that Musk had a hold on the board of directors and controlled the pay negotiations.
Musk has reiterated time and again that he needs to have a greater stake in Tesla to justify dedicating so much time to the company, or he might end up making products outside of it. Tesla’s closing price on March 11 was $230.58, implying that if Tesla creates a new compensation plan of the comparable size, Tesla will incur a charge of $25 billion. Thus, the appeal makes an important route to restore Musk’s payday. Musk has criticized the ruling and urged companies to move out of Delaware, following his own Tesla and SpaceX.
Currently, Musk is involved in leading the Trump administration’s DOGE (Department of Government Efficiency) committee, which is already drawing severe backlash from enraged consumers and shareholders. Musk’s political choices have led to a drop in demand for Tesla’s autos in Europe. Meanwhile, heated competition from domestic players has significantly dragged down Tesla’s sales in China. All of these factors have massively impacted Tesla’s stock price.
Is TSLA Stock a Buy, Hold, or Sell?
On TipRanks, TSLA stock has a Hold consensus rating based on 12 Buys, Holds, and Sells rating each. Also, the average Tesla price target of $333.14 implies 44.5% upside potential from current levels. In the past year, TSLA stock has gained 29.9%.
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