In a surprising turn of events, a Delaware Court of Chancery judge has invalidated Tesla CEO Elon Musk's record $56 billion pay package, calling compensation awarded by the electric car maker's board an “unfathomable amount” and unfair to shareholders.
Chancellor Kathleen St. J. McCormick's ruling on January 30, 2024, ended a five-year legal battle initiated by Tesla shareholders against Musk and the company's directors.
Councilor McCormick's decision
Chancellor McCormick's decision to cancel the $56 billion compensation awarded to Tesla in 2018 brought an end to a long legal dispute.
The shareholders alleged that Musk and the directors breached their duties to Tesla, using company resources for Musk's personal gain. The lawsuit alleged that Musk's influence over the negotiations was excessive, resulting in deceptive and incomplete information to shareholders.
Troubled legal history
In a previous case in 2022, the same judge oversaw a matter involving Twitter Inc., now X, where Musk was forced to go ahead with the acquisition. Despite this precedent, Twitter's subsequent performance has not been remarkable. Musk responded to the court's ruling on X by advising against incorporating a company in Delaware and recommending Nevada or Texas to make decisions that prioritize shareholders.
Read more: Elon Musk doubles down on crypto efforts; He reveals his DOGE and Bitcoin holdings!
Musk's tweets and investor fears
Musk responded to the court ruling over his X social media platform, with business advice, “Never incorporate your company in Delaware.” He recommended incorporating in Nevada or Texas in order to make shareholder-focused decisions.
Musk's immediate response on his social media platform reflects a mix of recognition and nervous anticipation about the court's decision. Investors are now concerned about the potential impact on the cryptocurrency market, and are speculating whether Tesla, at Musk's direction, might consider selling its large Bitcoin holdings.
A look at Tesla's financial report
Tesla's financial report for the fourth quarter of 2023 revealed total revenues of $25.2 billion and operating profits of $2.1 billion. Despite the legal challenges, Tesla has maintained its position in Bitcoin, holding 9,720 BTC for six straight quarters.
Currently, Bitcoin is facing resistance at $46,000, and is currently hovering at $43,014 with a 0.8% decline over the past 24 hours. Notably, Bitcoin saw an 8.32% increase during the week, which has intensified focus on Musk's next moves and potential shifts in the cryptocurrency landscape. Investors are watching developments closely.
Read also: FOMC suspended? Bitcoin is poised for a sideways move amid uncertainty over interest rate cuts
