Elon Musk's $56B Pay Could Be Voided With A Single 'Kill Shot,' But Judge Remains Skeptical

A single material misleading disclosure to shareholders could put to end Tesla Inc TSLA CEO Elon Musk’s $65 billion pay.

What Happened: Chancellor Kathaleen McCormick, a judge at the Delaware Court of Chancery, asked lawyers for Tesla directors and the investor challenging Musk’s pay whether the automaker's rapid growth took precedence over misleading disclosures about the pay plan in 2018, reported Reuters.

The lawyer for the investor, Richard Tornetta, reportedly told McCormick that because Musk’s pay plan was based on a shareholder vote, any material misinformation given to the shareholders should lead to the voiding of the plan.

The plan allows Musk to purchase 1% of Tesla’s stock at deeply discounted rates each time he meets certain performance and financial targets.

Why It Matters: McCormick called the lawyer’s argument the “kill shot” and termed it “elegant” but expressed her skepticism at the same time. The judge asked for both parties to give her an additional briefing on the argument, reported Reuters.

Tesla directors’ attorneys reportedly said Tornetta didn’t challenge the main details of the proxy that elaborated the plan such as the goals Musk had to meet for the payout to come into effect.

The attorneys asked McCormick to take into consideration if the plan was fair to shareholders since it led to a 10-fold rise in the price of Tesla’s shares, according to the report.

Musk, who testified at the trial, reportedly told the court that he thought of the pay package as a way to fund his goals of interplanetary travel.

Price Action: On Tuesday, Tesla shares closed 5.25% lower at $197.37 in the regular session, according to Benzinga Pro data.

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Photo by Steve Jurvetson on Flickr