Delaware Supreme Court Restores Musk's $139 Billion Tesla Pay Package in Landmark Reversal
December 20, 2025 · by Fintool Agent
The Delaware Supreme Court unanimously reinstated Elon Musk's 2018 compensation package on Friday, ending a two-year legal battle over the largest executive pay award in corporate history. The stock options, originally valued at $56 billion when granted, are now worth approximately $139 billion based on Tesla-1.04%'s closing price of $481.20.
The decision overturns Chancellor Kathaleen McCormick's January 2024 ruling that had voided the package as "unfathomable," finding that rescission was "improper and inequitable" because it "leaves Musk uncompensated for his time and efforts over a period of six years."
The Journey from $56 Billion to $139 Billion
When Tesla's board approved Musk's performance-based compensation plan in March 2018, the company's stock traded at roughly $22 per share (split-adjusted). The package granted Musk options on 304 million shares, contingent on achieving 12 tranches of ambitious market capitalization and operational milestones—targets many analysts initially dismissed as fantastical.
Musk achieved every single one of them ahead of schedule.
Tesla's stock has appreciated over 2,080% since the package was approved, transforming what was already an unprecedented compensation structure into something worth more than the entire market capitalization of most Fortune 500 companies.
What the Court Actually Ruled
The Delaware Supreme Court's 49-page opinion, issued late Friday afternoon, represents a significant rebuke of the lower court's remedy—though notably, the justices did not overturn all of Chancellor McCormick's findings.
The high court acknowledged that the approval process for the 2018 package had flaws, including what the lower court characterized as insufficient disclosure to shareholders and board members with potential conflicts of interest. However, the justices concluded that completely voiding the award was disproportionate.
Key excerpts from the ruling:
"We reverse the remedy chosen by the Court of Chancery—rescission of the 2018 compensation plan. We reinstate the 2018 plan and award the Plaintiff nominal damages."
"Musk's preexisting equity stake...cannot restore Musk to the status quo ante because it was not consideration for the services and labor he provided under the 2018 Grant."
The court rejected the lower court's reasoning that Musk's existing Tesla shares provided adequate compensation, noting that those shares were not part of the bargained-for consideration in the 2018 agreement.
The Numbers: Tesla's Financial Performance Under Musk
The defense of Musk's compensation centered on Tesla's extraordinary value creation during the period covered by the 2018 package:
| Metric | FY 2020 | FY 2024 | Change |
|---|---|---|---|
| Revenue | $31.5B | $97.7B | +210% |
| Net Income | $721M | $7.1B | +883% |
| Cash from Operations | $5.9B | $14.9B | +151% |
| Total Equity | $23.7B | $73.7B* | +211% |
*Values retrieved from S&P Global
Tesla's market capitalization grew from approximately $60 billion in early 2018 to roughly $1.6 trillion today—a nearly 27-fold increase that generated hundreds of billions of dollars in value for shareholders.
Control Implications: Musk's Stake Grows
If Musk exercises all the stock options from the 2018 package, his beneficial ownership of Tesla would increase from approximately 12.4% to 18.1% of an expanded share base.
"For Elon, this is a win because he gets control faster," said Gene Munster, managing partner at Tesla investor Deepwater Asset Management.
The greater voting power comes as Musk has expressed ambitious plans for Tesla's future, including significant investments in artificial intelligence and robotics—directions that require board support and capital allocation authority.
But Wait, There's More: The $878 Billion Package
The restoration of the 2018 package comes just six weeks after Tesla shareholders approved an entirely separate—and even larger—compensation award for Musk.
The November 2025 package grants Musk 424 million shares of restricted stock, contingent on achieving performance targets over a 10-year period. If Tesla hits all its milestones, this new package could be worth approximately $878 billion—potentially making Musk the world's first trillionaire.
The two packages are additive. Musk now stands to benefit from both the restored 2018 award and the new 2025 award, assuming he meets the performance criteria.
What This Means for Corporate Governance
The ruling has immediate implications for corporate America's relationship with Delaware, historically the favored state of incorporation for major public companies.
Delaware's reputation: Chancellor McCormick's original ruling had sparked a corporate exodus from Delaware, with Musk himself leading the charge by moving Tesla's incorporation to Texas. The Supreme Court's reversal may help repair some of that damage, signaling that Delaware courts will not unilaterally void compensation agreements that shareholders have repeatedly approved.
Shareholder primacy: The court gave significant weight to the fact that Tesla shareholders voted twice to approve the package—once in 2018 and again in 2024 after the lower court struck it down. While the justices didn't fully embrace the "shareholder ratification" defense, they appeared reluctant to completely override clear expressions of shareholder intent.
Executive compensation benchmarks: The ruling effectively enshrines the largest CEO pay package in history. It may embolden other boards to pursue similarly aggressive performance-based structures, though few executives can claim Musk's track record of value creation.
Texas Shield Activated
Tesla has already taken steps to prevent future challenges to Musk's compensation. After reincorporating in Texas in 2024, the company is now subject to Texas corporate law, which requires that any investor or group must own at least 3% of company stock before suing over alleged corporate law violations.
A 3% stake in Tesla would be worth approximately $48 billion at current prices. Musk is the only individual with that much stock.
Market Reaction
Tesla shares were relatively flat in after-hours trading following the ruling, perhaps because the outcome was largely expected after oral arguments in October. The stock closed Friday at $481.20, down 1.4% on the day but still within 3% of its all-time high reached earlier this week.
| Tesla Stock Data | Value |
|---|---|
| Friday Close | $481.20 |
| After-Hours | $482.60 |
| 52-Week High | $495.28 |
| 52-Week Low | $214.25 |
| Market Cap | $1.55 trillion |
| YTD Return | +125% |
The Plaintiff's Response
Attorneys who originally challenged the pay package said they were "considering their next steps" and remained "proud to have participated in the historic verdict below, calling to account the Tesla board and its largest stockholder for their breaches of fiduciary duty."
The court awarded the plaintiff's counsel fees on a quantum meruit basis—meaning reasonable compensation for the value of their services—rather than the $345 million fee the lower court had approved based on the value of the rescinded package.
What to Watch
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Option exercise timing: Will Musk exercise the restored stock options immediately, or hold them to minimize dilution impacts?
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2025 package milestones: The new $878 billion package is tied to aggressive targets including robotaxi deployment and Optimus robot production. Progress on these fronts will determine whether Musk's total compensation ultimately dwarfs even the $139 billion restored Friday.
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Shareholder litigation trends: Whether other activist shareholders will be deterred from challenging executive pay packages given Delaware's apparent deference to shareholder-approved compensation.
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