In a Delaware courtroom, where Tesla shareholders are contesting a remuneration package for CEO Elon Musk that might be worth more than $55 billion, testimony started on Monday.
According to the lawsuit, a pay committee negotiated the performance-based stock option grant.
The Tesla board of directors accepted it in 2018 despite having conflicts of interest because of their connections to Musk on a personal and professional level.
The case, filed in 2018, also asserts that a false and incomplete proxy statement was used as the foundation for the shareholder vote to authorize that remuneration.
Ira Ehrenpreis, a well-known VC and close friend of Musk who presided over Tesla’s pay committee when the grant was created, was the first witness summoned to the stand.
According to the deal, Musk could profit billions if the manufacturer of solar panels and electric cars reaches specific financial and operational benchmarks.
Musk, who held roughly 22% of Tesla when the plan was authorized, would get stock worth 1% of the market capitalization at the time of grant for each of the 12 milestones.
Musk’s ownership stake in the business would increase to around 28% if its market valuation increased by $600 billion.
Each goal in the strategy calls for increasing Tesla’s market value by $50 billion and hitting ambitious pretax profit and revenue growth targets.
Only if Tesla achieved a market capitalization of $650 billion and unheard-of revenues and earnings within the next three years would Musk reap the benefit of the pay plan, $55.8 billion.
According to the lawsuit, Tesla has so far met all 12 market capitalization targets and 11 operational milestones, which has caused 11 of the grant’s 12 tranches to vest and given Musk almost $52.4B in stock option gains.
Tesla’s market valuation has grown from $53 billion to more than $690 billion since the grant was given out, momentarily reaching $1 trillion earlier this year.
Like all manufacturers, Tesla Inc.’s stock has taken a beating this year as a result of clogged supply chains and rising prices.
Tesla stock has decreased 46% so far this year. Ford and GM stock prices have fallen by almost 31%.