Singapore-based Major Tesla Investor Is Reducing Bet That Made Him Rich

 

Tesla stock is under pressure because Tesla lost the pay lawsuit again and one Tesla shareholder sold his shares.

 

On Monday, Dec. 2, Delaware Court of Chancery Chancellor Kathaleen McCormick upheld a previous ruling to withdraw Musk's compensation plan.

 

 

This lawsuit began with Musk's 2018 compensation proposal: Tesla's board grants Musk 304 million shares of stock options, subject to the company having to meet certain operational and financial goals. However, Musk's ever-expanding stock holdings raised the ire of a shareholder named Richard Tornetta. Tornetta sued Tesla in Delaware state court, alleging that the compensation proposal was the result of “false negotiations” between the board and Tesla CEO Musk. In the first case, Judge McCormick ruled in favor of Tornetta and canceled Musk's compensation plan, prompting Tesla to move its headquarters from Delaware to Texas.

 

Tesla's Attorney, in a second appeal to the Delaware Court of Chancery, countered that over 75% of Tesla's shareholders (excluding Musk and his brother Kimbal Musk) approved the compensation package and the court should have retained jurisdiction over Musk's compensation case. However, Judge McCormick denied Musk's pay plan again and awarded plaintiff Tornetta $345 million for legal fees in a ruling on Monday.

 

Whether to appeal again remains an open question for Tesla. Both Tesla and Musk's attorney have commented that a judge should not be allowed to decide the company's vote. Barclays' Dan Levy said that Musk would commit to growing Tesla regardless of an appeal. Wedbush Securities' Dan Ives noted that Musk and Tesla's board wanted Musk's compensation package, so they would likely appeal to the US Supreme Court again.

 

Misfortunes never come singly. The billionaire LeoKoGuan, one of Tesla's largest individual shareholders, is cutting his stake in Tesla. KoGuan claimed that he was selling Tesla shares and buying U.S. treasury bills due to fears of a war-induced stock market crash. He calls this move a hedge against his portfolio. However, he is still holding Tesla for the long term to leave himself a way out.

 

 

Court rulings and reduced stock holdings could depress Tesla stock. As of Tuesday's (Dec. 3) US stock market close, Tesla was down 1.59% but was back up 0.22% in after-hours trading.