Tesla is determined to reinstate Elon Musk's massive compensation package, despite a recent court ruling. If unsuccessful, the company and its CEO could face significant tax and accounting charges exceeding $100 billion.
Tesla has vowed to press on with its fight to restore Elon Musk ’s historic pay package, and failure could have a high cost: the potential for more than $100bn in tax and accounting charges for the company and its chief executive. Delaware judge Kathaleen McCormick recently denied the electric vehicle maker’s second attempt to give Musk the largest package of stock options in history — worth $56bn at the time of the original ruling and more than $129bn at the current share price.
She found that shareholders’ overwhelming vote to reapprove the grant did not override her previous rejection of the 2018 deal as unfair and awarded by a board in thrall to its CEO. Her stance has left the board with a dilemma: pursue a lengthy and uncertain appeal with Delaware’s Supreme Court or award its chief executive with a new options package. If issued with similar terms, a new package could trigger a $50bn-plus corporate accounting charge and separately impose a punitive tax rate of up to 57 per cent on Musk’s shares, triggering a massive tax bill. In April, Tesla warned shareholders that reissuing a new set of stock options entitling Musk to buy the same 304mn shares would result in a compensation-related accounting charge of more than $25bn, since the company’s valuation was substantially higher than in 2018. That compares with a $2.3bn charge for the original 2018 award. Those calculations were based on a share price of $175 on April 1, when Tesla’s market capitalisation was $558bn. The stock has since more than doubled to $425 giving Tesla a valuation of $1.3tn — much of that due to investor enthusiasm for Musk’s newfound relationship with president-elect Donald Trump — implying the accounting charge could multiply by a similar amount. Less known are the potential tax implications for Musk, whose net worth recently soared past $400bn — the first person to reach that level of wealt
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