Updated April 24th, 2024 at 21:48 IST

Tesla shareholder seeks barring Musk from avoiding Delaware pay ruling

In their filing, Tornetta's team argued against Tesla's attempt to escape Delaware's jurisdiction.

Reported by: Business Desk
With a current networth of around $230 billion, Elon Musk could become the first trillionaire in the world. | Image:AP
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Tesla Stakeholder Challanges: A Tesla shareholder who successfully challenged CEO Elon Musk's $56 billion pay package is now seeking to prevent the company from sidestepping the Delaware court's ruling by relocating its legal jurisdiction to Texas.

Richard Tornetta's legal team urged Delaware Chancellor Kathaleen McCormick to address their request before Tesla's upcoming annual meeting on June 13, where shareholders will vote on moving the company's incorporation to Texas and approving Musk's controversial 2018 pay deal.

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In their filing, Tornetta's team argued against Tesla's attempt to escape Delaware's jurisdiction, emphasising the company's 21-year incorporation history in the state and its requirement for shareholders to pursue legal action there. Tesla and Musk have yet to respond to the latest development.

Earlier in January, Chancellor McCormick nullified Musk's extravagant pay package, criticizing its negotiation process by a board lacking independence from Musk and the withholding of crucial information from shareholders before their 2018 vote of approval.

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Musk's discontent with the Delaware court's ruling has been apparent, with criticism directed towards the state's efforts to retain corporations. The invalidated pay package offered stock option awards for approximately 304 million shares, contingent upon Tesla reaching various milestones.

Tornetta's legal team has now petitioned the court to seize the stock options as a further measure to ensure compliance with the January ruling. In an effort to salvage the pay package, Tesla has employed a tactic of asking shareholders to "ratify" Musk's 2018 compensation. This move is seen as a means to maintain Musk's incentive and potentially contest the substantial attorney fees of $6 billion sought by Tornetta's legal team.

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The shareholder's action follows Tesla's optimistic sales forecast for the year and its unveiling of plans to introduce more affordable models by early 2025. This positive outlook allayed concerns about slowing growth, leading to a more than 10 per cent surge in Tesla's shares during early trading on Wednesday.

(With Reuters Inputs) 

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Published April 24th, 2024 at 21:48 IST