Elon Musk over background of buildings and money

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After forcing him to buy Twitter, voiding $56 billion Tesla payout, Musk is done with the state of Delaware

Delaware keeps handing Musk Ls.

 

Katherine Huggins

Tech

Posted on Jan 31, 2024

Billionaire Elon Musk took to the social media platform he bought to whine about a Delaware judge ruling against his $56 billion pay package as CEO of Tesla Motors.

“Never incorporate your company in the state of Delaware,” Musk wrote Tuesday.

“I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters,” he added in a second post.

With more than two-thirds of all Fortune 500 companies registered in Delaware, the state is a popular place for businesses to incorporate in due to its lenient taxes, increased privacy, and simplified corporate laws. 

But whereas most businesses seem to find a friendly ear in Delaware court, Musk continues to struggle.

Musk’s comments came in the wake of a Delaware judge voiding his “unfathomable” $56 billion pay package from Tesla. That comes after a previous run-in with the Delaware Court of Chancery, when Musk tried to weasel out of his offer to buy Twitter, as people speculated Musk never expected his bid to be accepted.

“Swept up by the rhetoric of ‘all upside,’ or perhaps starry eyed by Musk’s superstar appeal, the board never asked the $55.8 billion question: Was the plan even necessary for Tesla to retain Musk and achieve its goals?” wrote Delaware Court of Chancery Chancellor Kathaleen McCormick, the same judge who handled Musk’s Twitter purchase.

McCormick found that the compensation package was unfair to shareholders and was set by the company’s board of directors, who did not show much evidence that they had negotiated with him.

The package, established in 2018, involves stock options Musk has yet to exercise. He qualified for the stock package based on meeting a series of ambitious company targets related to revenue and profit. Stockholders approved the conditions-based package in March 2018, with 73% of holders not affiliated with the Musk family voting yes.

The case began after a shareholder not among the 73%—Richard Tornetta—sued, arguing the Tesla board breached its fiduciary duty.

“This is insulting to shareholders,” Musk said Tuesday of the judge’s rationale.

He also argued the “real plaintiff” weren’t Tesla shareholders.

“The real plaintiff is almost always, and certainly is in this case, the class action law firm,” he said.

Musk posted a screenshot of a Wall Street Journal op-ed arguing that “Delaware is trying hard to drive away corporations” and toyed with the idea of changing Tesla’s registration to Texas.

“Should Tesla change its state of incorporation to Texas, home of its physical headquarters?” he asked in a poll in which 87.6% of respondents voted “yes.”

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*First Published: Jan 31, 2024, 10:01 am CST