US judge revokes Elon Musk's 'unfathomable' $56bn Tesla pay deal

Ruling can be appealed to Delaware Supreme Court
The image shows Tesla CEO Elon Musk. — Reuters/file
The image shows Tesla CEO Elon Musk. — Reuters/file

Kathaleen McCormick, a judge in the US state of Delaware has dismissed a $55.8bn (£44bn) pay deal awarded to Elon Musk by the electric vehicles (EV) maker company Tesla in 2018.

The invalidation of the deal has been executed over a petition lodged by a shareholder. The petitioner maintains in the lawsuit that the amount decided on the deal was an overpayment. 

Ruling out the Tesla board's approval of the pay, the judge said that the deal was "deeply flawed." The ruling can be appealed to the Delaware Supreme Court.

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Following the nullification of his deal, Musk shared a post on his social media platform X, formerly Twitter, stating, "Never incorporate your company in the state of Delaware." Being the biggest ever in entire corporate history, the deal could raise his rank on the list of richest people in the world.

Speaking in favour of Elon Musk, Tesla directors during the trial argued that the deal was made to ensure that one of the world's most dynamic entrepreneurs stay committed and attentive to the company, BBC reported.

However, terming the pay deal as "an unfathomable sum", the judge ruled that Tesla and Mr Musk's attorneys "were unable to prove that the stockholder vote was fully informed", and that he had "extensive ties with the persons tasked with negotiating on Tesla's behalf".

In the 21-page ruling, the judge also said the compensation was negotiated by Tesla's directors who had been "swept up by the rhetoric" surrounding Mr Musk's "superstar appeal".

In another post on X, Musk wrote, "I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters," following which he posted a poll asking his followers whether or not Tesla should "change its state of incorporation to Texas, home of its physical headquarters".

"I am uncomfortable growing Tesla to be a leader in AI and robotics without having 25pc voting control," he said in a social media post.

Taking Tesla's current shareholder structure as vulnerable to a "takeover by dubious interests," he said he wants more control over its direction. "Unless that is the case, I would prefer to build products outside of Tesla," he added.

Bearing a loss of more than 20pc of their value so far this year, Tesla shares lost 3pc in extended New York trade.