A Tesla shareholder named Richard J. Tornetta sued CEO Elon Musk and the company’s board of directors in a class action suit in June 2018, accusing them of breaching their fiduciary duties. Lawyers for the billionaire asked the Delaware court last week to dismiss the case, but the petition was denied, according to CNBC.
According to the US broadcaster, Elon Musk, who chairs the board of directors and is also the largest shareholder in Tesla, won a performance award in 2018, which consisted of 101.3 million options on the company’s stock. (subsequently readjusted for split on a 5-by-1 basis in 2020). However, the payment of the plan is conditioned to the achievement of goals.
In a statement, Tesla had a preliminary estimate of the aggregate fair value of the plan at $2.6 billion. The total package was valued at US$55.8 billion, considering the company’s market capitalization of US$650 billion. The big question is that Tesla is now a trillion-dollar company, a value reached in October last year, projecting stratospheric gains for Musk with the appreciation of the shares.
What is the Tesla shareholder’s goal?
In the lawsuit filed against Tesla and its CEO, Tornetta alleges that the plan that benefits Musk is “unfair and totally unnecessary”, since the billionaire already owned a large equity stake in the Austin company. He adds that the award is “beyond the bounds of reasonable judgment and is inexplicable for any reason other than bad faith.”
In the initial allegations, the shareholder claimed that the deal was actually worked out by Musk himself, with the personal assistance of his former divorce attorney Todd Maron, who was also Tesla’s general counsel at the time.
Chancellor of the court, Kathleen St. J. McCormick, denied Musk’s defense request and said the case goes to trial on April 18.