June 20, 2024

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Lawyers in Elon Musk pay case seek $6bn in Tesla shares

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Attorneys for shareholders who defeated Elon Musk’s $56bn Tesla pay package have asked a Delaware state court to award them shares in the electric vehicle maker worth nearly $6bn as payment.

In a filing with the Delaware Court of Chancery on Friday, Bernstein Litowitz Berger & Grossmann, the lead counsel for the plaintiff shareholders, conceded such an award was “unprecedented” in absolute value. However, they noted the implied percentage of value won for shareholders remained “conservative” and in line with previous Delaware awards.

“This structure has the benefit of linking the award directly to the benefit created and avoids taking even one cent from the Tesla balance sheet to pay fees,” the filing said, regarding the choice to take the carmaker’s stock instead of a cash award. “We are prepared to ‘eat our cooking’.”

The request follows a landmark ruling last month in which Kathaleen McCormick, the judge overseeing the case, rescinded a 2018 pay package the Tesla board had granted to Musk, which included multiple tranches of stock that vested after the company hit aggressive operating and financial milestones.

McCormick ruled the Tesla board was insufficiently independent of Musk, and that the governance process leading to the grant as well as the value of the shares had been “unfair” to other shareholders.

Lawyers who bring civil suits typically work on a contingency basis — rather than billing clients on hours worked, they will instead take on the odds of winning a case or securing a settlement, and seek a cut of the winning pot. The Musk pay case is more complex as no cash changed hands in the share-grant nullification.

Bernstein wrote in its filing that it believed it could have fairly asked for a third of the “benefit conferred” from the $56bn cancelled award, based on past precedent. It said the…

2024-03-01 19:26:24

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