How much time does Elon Musk really put into his company Tesla? A court will soon clarify this question. The fact that he recently bought a new toy could still be expensive for Musk.
Running just one company – that hasn’t been enough for Elon Musk for years. The Tesla boss kept founding other companies that sometimes implement the big dream of flying into space, sometimes small ideas like their own flamethrower. This is a thorn in the side of some Tesla shareholders. They want to take legal action to force Musk to fulfill his obligations to the car company instead of getting tangled up in new side projects. It’s many billions of dollars.
Because Musk had actually secured a lot of money with a deal: Whenever he achieves predefined goals, he can buy a package of Tesla shares at a preferential price. He negotiated this with the board of directors of the car company in 2018. A court case against the agreement will now begin on November 14th. Investor Richard Tornetta filed the lawsuit in 2019. His accusation: The “biggest reward in human history” made Musk significantly richer, but it didn’t do justice to its purpose for the automaker. The Twitter purchase should only strengthen this argument.
Part-time CEO
Tornetta argues that the primary goal of the plan was to tighten Musk’s leadership position at Tesla. As early as 2018, the enterprising entrepreneur had invested a lot of time in his other projects such as the Starlink satellite service, the space company SpaceX or his hobby innovation company Boring Company. Tornetta accuses him of being a “part-time CEO”.
In fact, Musk doesn’t deny it at all. According to the court documents, he works about half of his time at Tesla. His activity is Musk’s unique selling point, his lawyers try to argue. That was before Twitter was bought, though. The social network turns out to be an additional, very time-consuming project.
Bad timing
In fact, the timing for Musk’s lawsuit couldn’t be worse. Since the Twitter takeover, he has been spending a large part of his time with the short message service in the public eye. At the same time, Tesla’s share price has plummeted since the beginning of the year. At least part of this is certainly also due to the fact that Musk financed the $44 billion Twitter acquisition in good part with multiple sales of Tesla shares.
This did not go down particularly well with shareholders. The fact that it then became known that Musk was withdrawing staff from his other companies – including Tesla – to coordinate the Twitter takeover should certainly not contribute to his argument that he would always represent the interests of the car company.
Corona winner
It had looked pretty good for Musk in recent years. In order to achieve the maximum package currently worth just under $55 billion, he had to balance the value of the group from around $50 billion at the beginning to over $650 billion. An extremely ambitious goal at the time, which was surprisingly easy to achieve due to the Corona boom.
After the group’s value initially halved in the course of 2019, the tech stock boom in early 2020 pushed it steadily up. By the end of the year it had increased almost tenfold, Musk had needed only three years instead of ten to reach the maximum goal. The success continued in 2021, Tesla was worth almost twice as much as targeted at $ 1.24 trillion at its peak. Since then, however, the price has fallen sharply. And is now back below $ 600 billion.
Secondly, Musk was able to deliver significantly less. According to the agreement, Tesla’s revenue is expected to increase from almost 20 billion to over 175 billion dollars a year. But the company is a long way from that. In 2021, about 67 billion dollars were raised. In the fall quarter, however, Tesla was again slightly below expectations due to the poor overall economic situation. It will be difficult to generate another 100 billion dollars in sales.
billions at risk
If the court collects the deal, it will be a major financial setback for Musk. Part of the deal is that he gets the stock options in lieu of a regular salary. If his option on those shares were withdrawn, he would have worked for nothing in recent years instead of collecting many billions. The effects of the lawsuit on the share price and thus on his other assets are a further risk.
However, Musk cannot hope for a benevolent court. Musk has already had dealings with the responsible judge Kathaleen McCormick of the Court of Chancery in Delaware this year: In the spring he wanted her to confirm in a lawsuit that he did not have to take over Twitter at the agreed purchase price due to discrepancies. The outcome is known.
Quelle: Techcrunch, CNBC, Reuters, Tesla
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