Court case: Musk must fear for $100 billion share package

Entrepreneur and multi-billionaire Elon Musk has drastically tightened the conditions under which Tesla shareholders can sue him. The reason is a lawsuit by a small shareholder that could cost Musk Tesla shares worth approximately $100 billion. His compensation package, approved in 2018, stipulated that Musk could gradually purchase the 300 million shares at the 2018 price, provided the company met ambitious targets over a period of up to ten years.

Tesla even reached its targets much faster. At the current price, the package is worth more than $100 billion. After a small shareholder challenged Musk's multi-billion dollar share package in court, Tesla amended its bylaws. In the future, only shareholders with a stake of at least three percent may file lawsuits against managers or board members in the company's interest. Tesla is thus taking advantage of a change in the law in Texas, where the company is now headquartered.

However, the small shareholder, who owns only nine Tesla shares, had filed a lawsuit against the compensation at Tesla's then headquarters in the state of Delaware. A judge ruled in early 2024 that the allocation of the package was unlawful. Musk had exercised too much influence behind the scenes in negotiations with the electric car manufacturer's board of directors – a fact that had been concealed from shareholders, she argued. According to the amendment to the articles of association, shareholders must hold at least three percent of Tesla to file a lawsuit, which currently corresponds to around 97 million shares valued at $34 billion.

The case took an unusual turn after Tesla shareholders approved the package again at a general meeting in June 2024—this time apparently with more information, simply because of the high-profile trial. However, the judge upheld her rejection. Tesla appealed in Delaware—because the move to Texas in the summer of 2024 has no impact on the proceedings regarding the 300 million shares.