Despite misleading information: Elon Musk gets back rescinded Tesla shares

Tesla CEO Elon Musk is receiving another package of Tesla securities worth around 140 billion US dollars. This is a bonus program that Musk essentially dictated himself in 2018, even though he held less than 22 percent of Tesla shares at the time. The allocation was approved by Tesla's shareholders, but based on misleading information from the board of directors. Therefore, a court in the US state of Delaware last year overturned the billion-dollar allocation to Musk. Tesla has appealed this -- with success.

On Friday, the Supreme Court of Delaware amended the original decision of the Delaware Court of Chancery (Case No. 2018-0408). The Supreme Court does not change the fundamental finding that the bonus program was not legally established. However, it states that the annulment of the options package by the lower court is not the appropriate measure to remedy this impropriety.

Contrary to the lower court's assumption, the annulment would not lead to all parties being returned to the state before the bonus program for Musk was initiated. While Tesla could book back 2.3 billion US dollars and the shares of other shareholders would not be diluted, Musk would then be without compensation for six years of work in Tesla's service. The fact that Musk has earned tens of billions through the appreciation of his other Tesla shares and was also richly compensated through another bonus program running from 2012 to 2022 is irrelevant.

The Court of Chancery should have found a different measure – for example, a partial annulment of the bonus program (even without a party's request) or damages for the shareholders upon the request of the class representative. Since the plaintiff did not request damages, the Supreme Court awards him only a symbolic dollar.

Shareholders' Pyrrhic Victory

From a legal perspective, Tesla has lost the case, while Elon Musk has won economically. The remaining shareholders get nothing. Musk can now buy 303,960,630 Tesla shares at a preferential price of $23.33. The closing price on Thursday was $483.37. The difference of approximately 140 billion dollars is Musk's calculated profit.

In reality, he can only sell the shares after five years but may never do so. A peculiarity of the US tax system often makes it more advantageous for multi-billionaires to use shares as collateral for loans and live on credit until death. This way, the profits are never realized, thus avoiding income tax.

This has no impact on the compensation package, which was awarded in November and is even larger. It remains in place and could bring Musk, who is already the richest person in the world, around one trillion dollars.

In addition to the one dollar in damages, Tesla must pay the lawyers of the "victorious" opposing party. The car manufacturer itself proposed to give the lawyers four times the fee rate, which the Supreme Court of Delaware accepted. The exact sum is not yet known, but it is a fraction of the success bonus that would have been awarded by the first court, which has now also been overturned: 15 percent of the 2.3 billion dollars that Tesla would have saved by annulling the stock package, i.e., 345 million dollars.

The Misleading Information

When Tesla shareholders voted on Elon Musk's bonus program in 2018, the board members who had put the program in place were presented as independent of Elon Musk. They were not. As Tesla officials testified in court, there were no real negotiations regarding Musk's compensation. Instead, the man himself dictated the schedule and conditions.

The options program, exclusively set up for Musk, does not even include an obligation to perform specific tasks or work hours. In fact, Musk later spent the lion's share of his time managing a social network, not on Tesla tasks.

Furthermore, the metrics to be achieved for the allocation of options were presented to the decision-making shareholders as difficult to reach goals. However, they were below the internal forecasts that Tesla was using to solicit business from banks at the time. One shareholder felt cheated and filed a class-action lawsuit against Musk and six members of Tesla's board of directors. Not least, the issuance of stock options to Musk diluted the shares of other shareholders by eight percent according to the calculations at the time.

As of October 16, 2025, there were 3,325,819,167 Tesla shares in circulation. The 303,960,630 shares to be newly printed for Musk once he exercises his recovered options correspond to more than nine percent of this.

• The ruling of the Delaware Supreme Court (Case No. 534, 2024; 10, 11 and 12, 2025) of December 19, 2025

(ds)