Elon Musk

Elon Musk’s fury as lawyers ask for $9 billion in Tesla shares

Author: Editors Desk, Andrew Backhouse Source: News Corp Australia Network:
March 4, 2024 at 14:11

Elon Musk has reacted with fury after lawyers involved in his Tesla compensation package lawsuit asked for $9 billion in legal fees.

The lawyers who masterminded a lawsuit that stripped Elon Musk of his $AU85 billion Tesla compensation package are demanding eye-watering legal fees.

In late January, Chancery Court Judge Kathaleen McCormick in the US state of Delaware voided Mr Musk’s record-breaking pay package after ruling Tesla’s board of directors had not proved that “the compensation plan was fair”.

The lawyers representing plaintiff Richard Tornetta, who brought the case on behalf of shareholders, have requested payment in the form of 29 million Tesla shares.

That equates to about $AU9 billion ($US6 billion), given the securities are worth approximately $UA310 apiece.

Mr Musk, whose net worth is estimated to be about $322 billion — largely due to his stakes in Tesla and SpaceX — reacted to the news, angrily writing: “The lawyers who did nothing but damage Tesla want $US6 billion. Criminal.”

Elon Musk reacted angrily to the news that lawyers are seeking $AU9 billion in legal fees. Picture: Getty Images
Elon Musk reacted angrily to the news that lawyers are seeking $AU9 billion in legal fees. Picture: Getty Images

He later added: “Those lawyers are reaching new heights of hypocrisy! Fate loves irony, but hates hypocrisy.”

The law firms involved include Bernstein Litowitz Berger & Grossmann, Friedman Oster & Tejtel, and Andrews & Springer.

Tesla is being asked to foot the bill because it reaped the benefits from the cancellation of Mr Musk’s compensation package.

The lawyers worked on a contingency basis — commonly known as “no win, no pay” — for about five years before the bombshell legal win.

The requested amount is about 11 per cent of what Mr Musk was due to earn as compensation for his job as CEO of Tesla.

The fee works out to be about $442,353 an hour ($US288,888), The Guardian reports.

It will be a record award of legal fees if granted by Judge McCormick.

Lawyers in the Enron class action got about 9.5 per cent of the $11 billion ($US7.2 billion) payout to defrauded shareholders.

The lawyers in the Tesla case explained they would prefer stock to cash because it would not impact Tesla’s balance sheet.

“We are prepared to ‘eat our cooking’,” the lawyers said in a filing, Fortune reported.

“This structure has the benefit of linking the award directly to the benefit created and avoids taking even one cent from the Tesla balance sheet to pay fees. It is also tax-deductible by Tesla.”

The lawyers also asked for the court to order payment for disbursements totalling $1.72 million ($US1.12 million).

Mr Musk, meanwhile, has launched legal action for breach of contract against OpenAI, the firm behind ChatGPT, and its founder Sam Altman.

Elon Musk is suing Sam Altman, CEO of OpenAI. Picture: AFP
Elon Musk is suing Sam Altman, CEO of OpenAI. Picture: AFP

Mr Musk’s case is that OpenAI was founded to be open-source and not-for-profit, but that OpenAI had been repositioned to being closed-source in order to “maximise profits” and “make a fortune” for Microsoft.

In the words of the filing, Mr Musk alleged that Mr Altman “caused OpenAI to radically depart from its original mission and historical practice of making its technology and knowledge available to the public”.

Mr Altman made headlines in late 2023 when he was sensationally fired as CEO of OpenAI, before dramatically being reinstated after intense lobbying behind the scenes from investors including Microsoft.

Mr Altman responded sardonically to the lawsuit, by replying to a tweet posted by Mr Musk in 2019.

At the time, Mr Altman had written: “It’s gross seeing so many root against Tesla. Be the person on the side of the climate and innovation, not the person hoping to make money on puts. Also, betting against Elon is historically a mistake... and the best product usually wins.”

Elon Musk responded: “Thanks Sam!”

Mr Altman waited five years to reply — and only did so after Mr Musk’s case was filed — writing: “anytime”.

You did not use the site, Click here to remain logged. Timeout: 60 second