A Delaware judge ruled Monday that Tesla CEO Elon Musk is still not eligible for a $56 billion severance package, despite the electric vehicle company’s shareholders voting in June to reinstate him.
The decision by the judge, Chancellor of the Exchequer Kathaleen McCormick, follows her ruling in January that called the pay package excessive and struck it down, surprising investors and casting doubt on Musk’s future at the world’s most valuable automaker.
In a post on X after the ruling, the 52-year-old tech billionaire said “shareholders should control the votes of companies, not judges.”
In a statement to X, Tesla said: “The decision is wrong and we will appeal.”
He added that the judge had rejected a supermajority of shareholders.
Musk and Tesla can appeal to the Delaware Supreme Court once McCormick files a final order, which could come as soon as this week. The appeal may take a year to complete.
Tesla said in court filings that the judge should recognize a later June shareholder vote in favor of a pay package for Musk, the company’s driving force responsible for many of its advances, and reinstate the compensation of.
McCormick said Tesla’s board is not entitled to a “reset” to restore Musk’s pay package.
“If the court rejects the practice of allowing losing parties to create new facts for the purpose of reviewing judgments, lawsuits will become endless,” she said in her 101-page opinion.
He said a ratification vote like the one Tesla used had to be held before the test, and a company can’t ratify a transaction involving a conflicted auditor. He had decided that Musk controlled the pay negotiations.
He also said Tesla made multiple material misstatements in its proxy statement about the vote and could not claim the vote was the “cure” to justify restoring Musk’s pay.
Tesla shares fell 1.4% in after-hours trading following the decision.
Gary Black, chief executive of The Future Fund, which owns Tesla stock, told X that he believed the Delaware Supreme Court was more pragmatic than McCormick.
“I doubt this decision will be resolved anytime soon and will likely be overturned by a more moderate court down the road,” he wrote.
The pay package had given Musk stock options if the company met performance and valuation targets.
While the prize was initially valued at $56 billion, Tesla shares have risen 42% since November 5, when Republican candidate Donald Trump, backed by Musk, won the United States presidential election. After that rally, the pay package is worth about $101 billion.
The decision comes as Musk has been tasked by Trump to create a more efficient government by cutting spending. The role as co-head of the new Department of Government Efficiency would be informal rather than government, allowing Musk to keep his job at Tesla as well as leading other companies, including rocket maker SpaceX.
Musk stepped back from Trump’s campaign and became a close adviser in the process.
McCormick also ordered Tesla to pay the lawyers who brought the case $345 million, far less than the $6 billion they originally sought, but still one of the largest fee awards ever made in securities litigation. He said the fee could be paid in cash or Tesla stock.
“We are pleased with Chancellor McCormick’s decision, which rejected Tesla’s invitation to introduce continued uncertainty into the litigation,” said a statement from Bernstein Litowitz Berger and Grossmann, one of the plaintiff’s three law firms.
The law firm also said it looks forward to defending the court’s opinion if Musk and Tesla appeal.
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