Lawyers who represent the Tesla shareholders have requested a total of $5.6 billion amount in Tesla stock, as a fee, for their legal move, which was successful in challenging a $55.8 billion compensation package given to Elon Musk, the CEO. This was class action taken to a Delaware court as a result of the verdict finding Mukse’s pay package illegal. This clearly demonstrates the power of companies lawyer representatives.
What was the reason for the lawyers’ request for tesla stock
The legal team contended that this need for exceptional rewards was justified by their five-year work, that has been carried out on an hourly basis fee. The founders opined that they had made a huge positive impact on Tesla’s success and for TSLA to be awarding them was just a mere fraction (around 11%) of the shares that Musk was seeking in his compensation package.
The uniqueness of this motion lies in its dimension as well as its form of payment. It is almost all in Tesla shares which is a rare case in legal settlements.
How did the judge respond to the lawyers’ request for tesla stock
The judge was Justice Kathaleen St. Jude McCormick. She had ruled earlier in the case in favor of the shareholders’ lawyers. They had argued that Musk chose the 2018 pay package on his own without consulting the board.
They claimed that negotiations were fake. This unraveled a hefty compensation package for Musk, the holder of 13% of the Tesla share, that would have solidified his place as the highest paid one.
How would this impact Tesla
Tesla Lawyers request payment in Tesla stock rather than cash highlights an interesting aspect of this case, one that in particular does not directly affect Tesla ‘s balance sheet and, on one hand, is tax-deductible for the company. As a result, the sharing of the requested amounts will be available for trading, unlike the five-year holding period for Musk’s stock options under the contested plan.
The legal fighting and consequential results of this will reflect critical points for Tesla’s shares. The financial impact of the new request might be proven insignificant if we take into account the way Tesla is going to pay for Tusk’s service.
Legal process, with an option to go to appeal and to reinforce the agreement, has started, and Tesla community and investors are attentive whether that would interfere with company’s future management efficiency and financial health.
