Elon Musk ceded the title of world’s richest person to Frenchman Bernard Arnault of luxury conglomerate LVMH Tuesday evening, after a Delaware judge voided a hefty package of performance-based Tesla options awarded to Musk in 2018. Those shares had been worth more than $50 billion. Forbes estimates that Musk is now worth $184.5 billion. He now trails Arnault (estimated net worth: $210.8 billion) but remains ahead of the world’s third richest person, Amazon’s Jeff Bezos ($179 billion).
In her ruling, Delaware judge Kathaleen McCormick determined that Musk and his co-defendants, Tesla and certain of its board members, failed to prove that the process underlying the award of “the largest potential compensation opportunity ever observed in public markets” was fair due to conflicts of interest and Musk’s “control” over the board. Musk’s options were worth $50.9 billion (net of exercise cost) at Tuesday’s stock market close (the value of the package varies based on Tesla's stock price; Tesla estimated that the options would be worth $55.8 billion upon fully vesting, which occurred in late 2022). Because of the ruling, he won’t be able to exercise or sell them. Given the high level of uncertainty about what comes next–including an appeal of the ruling, Forbes has discounted Musk’s options by 50%, enough to knock his net worth down by $25.5 billion after the decision.
Read the full story on Forbes: https://www.forbes.com/sites/mattdurot/2024/01/31/elon-musk-no-longer-worlds-richest-after-judge-voids-51-billion-pay-package/?sh=26c43b486c26
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In her ruling, Delaware judge Kathaleen McCormick determined that Musk and his co-defendants, Tesla and certain of its board members, failed to prove that the process underlying the award of “the largest potential compensation opportunity ever observed in public markets” was fair due to conflicts of interest and Musk’s “control” over the board. Musk’s options were worth $50.9 billion (net of exercise cost) at Tuesday’s stock market close (the value of the package varies based on Tesla's stock price; Tesla estimated that the options would be worth $55.8 billion upon fully vesting, which occurred in late 2022). Because of the ruling, he won’t be able to exercise or sell them. Given the high level of uncertainty about what comes next–including an appeal of the ruling, Forbes has discounted Musk’s options by 50%, enough to knock his net worth down by $25.5 billion after the decision.
Read the full story on Forbes: https://www.forbes.com/sites/mattdurot/2024/01/31/elon-musk-no-longer-worlds-richest-after-judge-voids-51-billion-pay-package/?sh=26c43b486c26
Forbes Daily Briefing shares the best of Forbes reporting on wealth, business, entrepreneurship, leadership and more. Tune in every day, seven days a week, to hear a new story. Subscribe here: https://art19.com/shows/forbes-daily-briefing
Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1
Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:
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PeopleTranscript
00:00 Here's your Forbes Daily Briefing for Friday, February 2nd.
00:05 Today on Forbes, Elon Musk no longer world's richest after judge voids $51 billion pay
00:11 package
00:12 Elon Musk ceded the title of the world's richest person to Frenchman Bernard Arnault
00:19 of luxury conglomerate LVMH as of Tuesday evening after a Delaware judge voided a hefty
00:25 package of performance-based Tesla options awarded to Musk in 2018.
00:30 Those shares had been worth more than $50 billion.
00:35 Forbes estimates that Musk is now worth $184.5 billion.
00:40 He now trails Arnault, who has an estimated net worth of $210.8 billion.
00:46 But he remains ahead of the world's third richest person, Amazon's Jeff Bezos, who has
00:51 an estimated net worth of $179 billion.
00:55 In her ruling, Delaware judge Kathleen McCormick determined that Musk and his co-defendants,
01:01 Tesla and certain of its board members, failed to prove that the process underlying the award
01:06 of "the largest potential compensation opportunity ever observed in public markets" was fair
01:13 due to conflicts of interest and Musk's "control" over the board.
01:18 Musk's options were worth $50.9 billion net of exercise costs at Tuesday's stock market
01:24 close.
01:25 Because of the ruling, he won't be able to exercise or sell them.
01:29 Given the high level of uncertainty about what comes next, including an appeal of the
01:33 ruling, Forbes has discounted Musk's options by 50 percent, enough to knock his net worth
01:39 down by $25.5 billion after the decision.
01:44 UCLA law professor Jim Park says, "The ruling will certainly be appealed, and there is some
01:51 chance of reversal or a different remedy.
01:54 Chancellor McCormick is well regarded and known as careful, so I think there's a good
01:58 chance her decision will get some deference from the Delaware Supreme Court.
02:02 On the other hand, perhaps the Supreme Court will worry that the decision will send a negative
02:06 message to the business community and will thus reduce the award."
02:12 There is also the possibility that Tesla could just grant Musk another pay package with a
02:16 more rigorous process designed to withstand legal scrutiny.
02:20 After all, Tesla shareholders, whose stock has appreciated more than sevenfold since
02:25 2018, haven't exactly celebrated the decision by the Delaware court.
02:30 Shares of Tesla were trading down 0.8 percent as of 2.30 p.m. Eastern Time on Wednesday.
02:37 Michigan law professor Adam Pritchard says, "If the pay package is struck down, Musk will
02:43 demand another, and he'll get it.
02:46 But it's very hard to say how different that would be from this package."
02:51 Musk had been clamoring for even more Tesla shares prior to the Delaware judge's decision.
02:56 In an ex-post on January 15th, he wrote, "I am uncomfortable growing Tesla to be a leader
03:02 in AI and robotics without having approximately 25 percent voting control."
03:08 If upheld on appeal, the judge's decision to void Musk's options pay package would drop
03:13 his stake in Tesla from 22 percent to 13 percent.
03:19 For full coverage, check out Matt Durow's piece on Forbes.com.
03:25 This is Kieran Meadows from Forbes.
03:27 Thanks for tuning in.
03:28 "
03:34 "
03:40 (upbeat music)