A Delaware judge recently ruled against a $56 billion compensation plan for Tesla Inc TSLA CEO Elon Musk, which created some level of uncertainty for the company.
Musk could soon be appealing the decision.
What Happened: Shareholders and analysts have been expecting Musk to appeal the ruling and a letter to the court earlier this week indicated that has finally happened.
A letter to the court asked Delaware Chancery Court Judge Kathaleen McCormick to pause the ruling, according to a report from Reuters.
The two sides in the case will agree to a stay in the case if they can reach a deal on an appeal, shareholder attorney Greg Varallo told Reuters.
Musk can not appeal until approval by the judge and the petition for a legal fee of how much Tesla will have to pay in the case.
In 2018, shareholders supported the pay package when it was voted on. Shareholder Richard Tornetta then sued Musk and the Tesla board on behalf of the company. Notably, he is not seeking damages for himself but rather aims to rescind Musk's 2018 stock grants, according to a Benzinga article.
Judge McCormick’s original ruling said that shareholders were not properly informed, with Musk controlling the negotiations.
Related Link: Tesla Stock Pops On Filing Showing Elon Musk Owns 20.5%: Here’s What Happened
What's Next: According to the Reuters report, both Musk and the shareholder who won the case will tell the court their position on the legal fees by March 1, 2024.
Approval of the legal fees and final order by McCormick will then open the appeal window. Musk will have 60 days to file an official appeal with the Delaware Supreme Court. The report said an appeal in the case could take around six months to resolve.
Musk indicated Tesla will move its state of incorporation from Delaware to Texas as a result of the recent ruling.
If the compensation plan is voided and an appeal does not overturn the case, Tesla would have to come up with a new compensation plan and Musk could see his status as the world's richest person in jeopardy.
TSLA Price Action: Tesla shares are up 3.74% to $195.76 on Thursday versus a 52-week trading range of $152.37 to $299.29.
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