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Musk Wins Delaware Court Restores Tesla Pay Package in Full · Elon Musk Podcast

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  now would help the show tremendously.
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  Thank you so much. The Delaware Supreme Court just
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  handed Elon Musk a $139 billion windfall.
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  Now, the court reversed a lower court ruling that it's stripped
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  Musk of his 2018 pay package from Tesla, a package that was
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  worth $56 billion when it was granted and has ballooned to 139
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  billion at Friday's closing stock price.
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  And Musk is already the richest person on Earth, worth an
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  estimated $679 billion, and this ruling makes him significantly
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  richer now. For almost 2 years, the Delaware
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  judge had rejected this pay package, now once but twice,
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  calling it unfathomable and the approval process deeply flawed.
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  So what has changed here? How did the state's highest
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  court reverse a ruling that seemed so definitive over that
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  amount of time? Now the answer involves A
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  shareholder with just nine Tesla shares, a legal battle that
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  damaged Delaware's reputation as a corporate friendly state, and
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  a 49 page ruling that said the lower court went too far.
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  Today we're going to walk through the original lawsuit
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  with a lower court found, why the Supreme Court disagreed, and
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  what this means for Musk's control of Tesla going forward.
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  And we'll get right into that after this short break.
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  Now, the Delaware Supreme Court issued its ruling on Friday,
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  December 19th, 2025, restoring Musk's 2018 compensation package
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  in full. And the court awarded Tesla
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  exactly $1.00 in nominal damages.
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  A single dollar is the only penalty, and the 2018 pay
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  package gave Musk options to acquire about 304,000,000 Tesla
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  shares at a deeply discounted price.
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  That represents around 9% of Tesla's total outstanding stock.
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  And the package was structured around 12 tranches of stock
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  options, each tied to ambitious financial and operational
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  milestones. And when the board approved it
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  in January 2018, Tesla's market cap hovered between 50 billion
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  and $75 billion. Now the at that moment, the
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  company was still struggling to scale up.
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  Production of the Model 3 was burning through cash.
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  There were skeptics everywhere predicting failure.
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  Hitting all 12 milestone seemed like a crazy idea, a long shot.
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  And the package was designed as an all for nothing, like a Hail
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  Mary. There's no base salary.
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  He didn't have any guaranteed payout, only stock options tied
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  to extreme performance targets. Musk hit every single one of
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  them. Tesla's market cap today sits at
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  $1.6 trillion. That 30 fold increase is what a
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  $56 billion grant became worth $139 billion now.
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  The lawsuit that challenged this pay package came from an
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  unlikely source. Richard Tornetta, A shareholder
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  who owned just nine Tesla shares, filed A derivative
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  action in 2018. So a derivative action is a
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  lawsuit filed on behalf of the company itself against its own
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  executives board. Tornetta accused Musk and the
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  Tesla board of breaching their fiduciary duties by approving
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  such a massive award. He argued the Musk had too much
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  control over the board, that the approval process was essentially
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  rubber stamping whatever Musk wanted.
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  It's a serious accusation. The case went to trial in 2022.
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  For five days now, Chancellor Kathleen McCormick of Delaware's
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  Court of Chancery presided over the trial, review the evidence
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  and ruled against Musk in January 2024.
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  Her ruling was detailed and damning.
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  She found that Musk controlled Tesla and that the process
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  leading to the board's approval was deeply flawed.
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  That's very important. Delaware law applies A stricter
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  standard called entire fairness when a controlling shareholder
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  is on both sides of the transaction.
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  Under that standard, is on the board had to prove the deal was
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  entirely fair to all shareholders.
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  They failed to do that. McCormick concluded that Tesla's
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  board failed to disclose all material information to
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  shareholders before asking them to vote on the plan.
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  She found several board members were friends with Musk, very
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  close friends, former clients of his and also his brother.
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  Now, the testimony during trial painted a picture of a board
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  that had, in Mccormick's words, capitulated to Musk's terms.
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  She ordered the entire package rescinded.
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  Now, Musk did not take that ruling well.
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  He threw a fit. He moved Tesla's incorporation
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  from Delaware to Texas. Within months of the ruling,
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  publicly attacked McCormick by name on social media, where he
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  has 10s of millions of followers on X, and called Delaware judges
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  activists who were hostile the tech founders.
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  He urged other entrepreneurs to leave Delaware entirely.
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  Several large companies listened.
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  Dropbox, Roblox, Trade Desk and Coinbase all moved their legal
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  homes to Nevada or Texas. Now that exodus put pressure on
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  Delaware's reputation as the go to state for corporate law.
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  And for decades, more than half of all publicly traded U.S.
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  companies have incorporated in Delaware specifically because of
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  its specialized business courts in predictable legal precedents.
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  And Musk was attacking the state score industry, and his message
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  was very clear, rule against me and I'll take my companies
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  anyplace else but Delaware. Now, Tesla's board tried a
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  different approach. In June 2024, they asked
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  shareholders to vote again on the 2018 pay package,
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  essentially asking them to ratify the deal that the court
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  had already struck down. Shareholders approved at the
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  second time. Tesla's lawyers argued this was
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  the most informed shareholder vote in Delaware history.
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  Every detail of the litigation was public, every criticism was
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  known, and shareholders still said yes.
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  McCormick rejected that argument as well.
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  In December 2024, she ruled that a shareholder vote after a trial
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  cannot simply override a court judgment that would allow
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  companies to simply redo votes until they get the outcome that
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  they want. She called the ratification
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  defense ultimately and untimely, since defendants raised it six
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  years after the lawsuit started, more than a year after trial and
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  five months after her original ruling.
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  No Delaware court had ever reversed its judgment based on a
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  shareholder vote That happened after the trial.
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  She wrote that if companies could create new facts after
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  adjustment was entered, it would undermine the entire system.
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  She also awarded the plaintiff's attorney $345,000,000 in fees,
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  then asked for 5.6 billion. McCormick called that a bold ask
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  in a case about excessive compensation.
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  Now here's where the Supreme Court disagreed.
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  Here, in his 49 page ruling, the court said Mccormick's decision
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  to rescind the entire pay package wasn't proper in and
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  inequitable. The key line, in their opinion,
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  precision, leaves Musk uncompensated for his time and
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  efforts over a period of six years.
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  And the court is not saying the process was clean.
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  The court did not reverse Mccormick's finding that Musk
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  was a controlling shareholder or that the board's process was
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  flawed. What the court said is that
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  throwing out the entire package was too harsh of a remedy.
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  The lower court did not give Tesla a chance to propose what
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  fair compensation should have been.
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  Total recession was too extreme. Now.
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  The ruling was issued per curium, which means no single
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  judge took credit for writing it.
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  There was no dissent. A Columbia law professor noted
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  that while this ruling restores the 2018 pay plan, the rest of
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  Mccormick's analysis remains intact.
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  The findings about must control the board's failures.
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  All that still stands. The precedent about flawed board
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  processes remains now. What changed is the punishment
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  though. So what does this mean for Elon
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  Musk beyond the obvious $139 billion in stock option?
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  This ruling ends years of legal uncertainty.
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  Musk never collected on his 2018 options because of this
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  litigation. But now we can.
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  Tesla shareholders had approved a backup compensation plan in
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  November 2025 case Musk lost the appeal.
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  The backup plan is now nullified.
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  It is no longer needed, but Tesla also approved something
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  bigger last month, a new pay package for Musk worth up to a
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  trillion dollars over the next decade.
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  And that package kicks in if Musk can grow Tesla's market cap
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  to $1.6 trillion, or from 1.6 trillion to $8.5 trillion, but
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  also increases voting power from around 13% to around 25%.
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  That is a separate arrangement from the 2018 package.
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  Now Musk now has the $139 billion 2018 package restored,
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  plus a pathway to a trillion dollars more if Tesla hits
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  extraordinary growth targets now.
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  Musk responded on X Friday evening with a simple post.
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  He said thank you for your unwavering support.
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  That was it. Tesla stock was up slightly and
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  after hours trading following the news, the company currently
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  trades near record highs and Tesla did not immediately
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  respond to any of our requests for comments.
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  Now the biggest story here is about Delaware itself and what
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  this ruling signals to corporate boards everywhere.
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  For decades, Delaware has been the most popular legal home for
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  American public companies. The courts specialize in
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  corporate law, but Musk's public attacks in his high profile exit
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  created APR problem. This ruling may repair some of
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  that damage, and it shows Delaware Supreme Court is
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  willing to overrule its own lower courts when it believes
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  the remedy goes too far. That can reassure corporate
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  boards that even if a court finds process failures, total
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  rescission is not automatic. Could also encourage more
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  aggressive compensation packages.
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  Some boards might conclude that even a flawed process results in
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  only minor penalties. So we do not know yet which
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  interpretation wins out. We do know now is that the
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  world's richest man just got substantially richer and legal
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  fight they consume nearly seven years is finally over.
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