Twitter deal may strengthen Musk’s $56 billion Tesla pay lawsuit

Elon Musk’s $44 billion buyouts of Twitter are providing ammo for an impending trial in which an investor will say the CEO’s $56 billion pay deal from Tesla Inc was a waste of money because it did not secure his full-time services.

According to one of the shareholder’s attorneys, the Twitter Inc deal and its ability to divert Musk from Tesla will play a key role in the October trial.

According to the lawsuit, Musk devised the 10-year deal, which Tesla’s board approved in 2018 without requiring the celebrity CEO to devote himself to the electric vehicle firm.

“Look at most CEO contracts. The first line, says ‘you’re going to be a full-time CEO and devote substantially full time to the business and affairs of the company.’ That’s standard,” said Greg Varallo of Bernstein Litowitz Berger & Grossmann, the corporation that is spearheading the opposition to the pay deal.

Requests for a response from Musk and Tesla went unanswered. The defendants stated in court papers that the plan was lawfully created by independent directors, adopted by stockholders, and has resulted in unprecedented benefits for investors.

Tesla’s stock has dropped more than 20% after Musk revealed on April 4 that he had purchased a 9% stake in Twitter, partially due to concerns that he was distracted from the electric vehicle maker’s supply chain issues.

The 2018 Tesla pay package includes stock options that are granted as the company meets escalating financial targets, which the company claims will incentivize its continuing leadership. If Tesla completed all of the “stretch” goals, the plan would be valued at least $56 billion, though the value of the plan increases as Tesla’s stock climbs.

According to Amit Batish of research company Equilar, Musk’s stock vested under the plan is currently valued at roughly $75 billion. He projected that it is almost 35 times the total value of the top 100 CEO pay packages in 2021.

According to shareholder Richard Tornetta’s lawsuit in Delaware’s Court of Chancery, the package was unnecessary because Musk controlled 22 percent of Tesla at the time, providing him sufficient motivation to make the firm a success.

Tornetta wishes to rescind the plan, including any stock options that have already been given.

Musk is pledging Tesla equity as security for loans to purchase Twitter.

In court documents, Musk and Tesla’s board maintained that the pay package accomplished what it set out to do: align Musk’s incentives with shareholders and produce value.

“Since it was implemented, Tesla’s value has increased by more than 1,800% from about $53 billion to over $1 trillion,” the filing said. They pointed out that, despite the tremendous increase in value, Musk has yet to achieve all of the goals.

In March 2018, shareholders accepted the package, which was described as “difficult” in securities filings.

According to the lawsuit, shareholders should have been advised prior to the vote that management was aware of certain milestones that were likely to be met, which was regarded as a materially deceptive omission.

In court documents, Tesla argued that the internal predictions were “stretch” targets.

“Nothing that Elon touches or does is not bold and super stretched and aggressive,” Tesla’s former chief financial officer, Deepak Ahuja, according to a court filing, testified in the lawsuit during a deposition.

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