Elon Musk lost his title as the world's richest man to a luxury compound on Tuesday night after a Delaware judge invalidated a hefty package of performance-based Tesla options he awarded Musk in 2018. It was given to Bernard Arnault, a Frenchman from the company LVMH. These stocks were worth more than $50 billion. forbes Musk's worth is currently estimated at $184.5 billion. He is currently behind Mr. Arnault (estimated net worth of $210.8 billion), but still ahead of the world's third-richest person, Amazon's Jeff Bezos ($179 billion).
Delaware Judge Katherine McCormick said in her ruling that Musk, his co-defendants, Tesla and certain of its directors are the basis for an award of “the largest potential compensation opportunity ever observed in the public market.” It was determined that the process could not be proven to be fair. Conflicts of interest and Musk's “control” over the board. Musk's options were worth $50.9 billion (net of exercise costs) as of Tuesday's stock market close. The ruling prevents him from exercising or selling them. Given the high degree of uncertainty about what will happen next, including any appeals against the judgment; forbes It discounted Musk's options by 50%, enough to reduce Musk's net worth by $25.5 billion after the decision.
“[The ruling] There will definitely be an appeal, and there could be a reversal or other remedies,” said Jim Park, a UCLA law professor. “Chancellor McCormick has a good reputation and is known to be prudent, so I think there's a good chance that her decisions will receive some respect from the Delaware Supreme Court. On the other hand, perhaps the Supreme Court , will be concerned that this judgment sends a negative message to the business community and that awards will be reduced as a result.”
It's also possible that Tesla simply offers Musk a different pay package with a more rigorous process designed to withstand legal scrutiny. As it turns out, Tesla shareholders, whose stock has increased more than sevenfold since 2018, aren't exactly celebrating the Delaware court's decision. Tesla stock was down 0.8% as of 2:30 p.m. ET on Wednesday.
“If the pay package is cut off, Mr. Musk will ask for another paycheck, and he will accept it,” said Adam Pritchard, a Michigan law professor. “but [it’s] It's very difficult to say how much it differs from this package. ”
Musk had been pushing for more Tesla stock even before the Delaware decision. In a Jan. 15 post on X, he wrote that he was “uneasy about building Tesla into a leader in AI and robotics without having up to 25% voting control.” If upheld on appeal, the judge's decision to invalidate Musk's option compensation package would reduce his ownership in Tesla from 22% to 13%.