[HN Gopher] Elon Musk's $55B Tesla Pay Package Voided by Judge
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Elon Musk's $55B Tesla Pay Package Voided by Judge
Author : toomuchtodo
Score : 36 points
Date : 2024-01-30 21:53 UTC (1 hours ago)
(HTM) web link (www.bloomberg.com)
(TXT) w3m dump (www.bloomberg.com)
| pavlov wrote:
| Does this mean he could face margin calls on loans banks have
| made against his Tesla stock? A substantial part of the
| collateral may not belong to him after all...?
| TheAlchemist wrote:
| Yes and no.
|
| He still owns ~400M shares and had options on 304M more. The
| 304M just got cancelled.
|
| He has around 260M shares pledged as collateral against his
| loans - at least according to the latest known numbers (from
| 2022 I believe).
|
| So let's say he's not yet under water, but the margin just got
| dangerously close to the limit.
| fooey wrote:
| According to the Tesla bylaws, you can only leverage 25% of
| your stock, so that's going to be a problem for him too
|
| https://www.sec.gov/Archives/edgar/data/1318605/000156459021.
| ..
|
| > In order to mitigate the risk of forced sales of pledged
| shares, the Board has a policy that limits pledging of Tesla
| stock by our directors and executive officers. Pursuant to
| this policy, directors and executive officers may pledge
| their stock (exclusive of options, warrants, restricted stock
| units or other rights to purchase stock) as collateral for
| loans and investments, provided that the maximum aggregate
| loan or investment amount collateralized by such pledged
| stock does not exceed twenty-five percent (25%) of the total
| value of the pledged stock.
| fred_is_fred wrote:
| Thank you. I've been looking for this in every news story
| posted since the verdict.
|
| Does anyone know where the cancelled shares go? Back to
| Tesla? I assume he can get a massive tax refund now?
| kklisura wrote:
| Court's opinion/judgement [1], and a PDF version [2]
|
| [1] https://www.courtlistener.com/opinion/9470356/richard-j-
| torn...
|
| [2] https://courts.delaware.gov/Opinions/Download.aspx?id=359340
| justinclift wrote:
| https://web.archive.org/web/20240130220549/https://www.bloom...
| soulbadguy wrote:
| The court opinion is surprisingly readable. I don't know why, but
| I was expecting a lot more opaque lawyerly jargon.
|
| TLDR : The process used to decided the comp package was flawed
| (mainly because of the conflict of interest from the people
| negotiating on behalf of tesla) and the comp package itself can't
| be justified by objective metrics
| bdjsiqoocwk wrote:
| > The court opinion is surprisingly readable. I don't know why,
| but I was expecting a lot more opaque lawyerly jargon.
|
| As a European person, this is the kind of pleasant surprises I
| expect to hear from America
| TheAlchemist wrote:
| Fun fact - it's the same judge that forced Musk to buy Twitter !
| ivanmontillam wrote:
| Could this be intepreted as a negative bias against Elon Musk?
|
| One could argue this judge has pushed the limits of the law to
| exert a revenge force of some sorts.
| TheAlchemist wrote:
| It could, and it certainly will be by Elon.
|
| But it also could be, that Elon is completely disregarding
| the law, and has for years.
|
| This will become very apparent soon(ish) as there will be
| more trails, against him and against Tesla.
| rsynnott wrote:
| ... Revenge for _what_?
|
| I think it's probably just that there aren't _that_ many
| Delaware chancery judges, and he's kind of a frequent flier.
| mikeyouse wrote:
| You can argue literally anything - but it's highly doubtful
| that this rises to anything resembling judicial misconduct.
| The appeal would have to go to the US Supreme Court.
|
| Ruling is here [https://courts.delaware.gov/Opinions/Download
| .aspx?id=359340] but this part seems instructive:
|
| > _The plan offers Musk the opportunity to secure 12 total
| tranches of options, each representing 1% of Tesla's total
| outstanding shares as of January 21, 2018. For a tranche to
| vest, Tesla's market capitalization must increase by $50
| billion and Tesla must achieve either an adjusted EBITDA
| target or a revenue target in four consecutive fiscal
| quarters. With a $55.8 billion maximum value and $2.6 billion
| grant date fair value, the plan is the largest potential
| compensation opportunity ever observed in public markets by
| multiple orders of magnitude--250 times larger than the
| contemporaneous median peer compensation plan and over 33
| times larger than the plan's closest comparison, which was
| Musk's prior compensation plan. This posttrial decision
| enters judgment for the plaintiff, finding that the
| compensation plan is subject to review under the entire
| fairness standard, the defendants bore the burden of proving
| that the compensation plan was fair, and they failed to meet
| their burden._
|
| The lack of indepdence of the Tesla Comp. Committee was one
| big issue the judge found;
|
| > _The process leading to the approval of Musk's compensation
| plan was deeply flawed. Musk had extensive ties with the
| persons tasked with negotiating on Tesla's behalf. He had a
| 15-year relationship with the compensation committee chair,
| Ira Ehrenpreis. The other compensation committee member
| placed on the working group, Antonio Gracias, had business
| relationships with Musk dating back over 20 years, as well as
| the sort of personal relationship that had him vacationing
| with Musk's family on a regular basis. The working group
| included management members who were beholden to Musk, such
| as General Counsel Todd Maron who was Musk's former divorce
| attorney and whose admiration for Musk moved him to tears
| during his deposition. In fact, Maron was a primary gobetween
| Musk and the committee, and it is unclear on whose side Maron
| viewed himself. Yet many of the documents cited by the
| defendants as proof of a fair process were drafted by Maron._
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