DOVER, Del. — DOVER, Del. (AP) —
Current and former directors of electric-vehicle maker Tesla Inc. have agreed to return more than $735 million to the company to settle a shareholder lawsuit alleging that they unjustly enriched themselves with excessive compensation.
The proposed settlement was outlined in documents filed late Friday in the Delaware Court of Chancery and is subject to court approval. The settlement does not include claims involving any other Tesla shareholder suit, including a separate Chancery Court action challenging a compensation package awarded to CEO Elon Musk in 2018 that is potentially worth more than $55 billion. A ruling in that case is expected in the very near future.
The settlement agreement involves a derivative lawsuit filed on behalf of the company in 2020 by the Police and Fire Retirement System of the City of Detroit, a retirement fund that invested in Tesla and challenged stock options granted to company directors starting in June 2017.
The settlement agreement calls for the director defendants, including Oracle co-founder and former Tesla board member Larry Ellison, to provide Tesla with the value of more than 3.1 million stock options, in the form of returned cash, returned stock and unexercised stock options. The total value is based on a settlement stock price of $260.54, which was Tesla’s closing share price on June 16. According to the court filing, the parties accepted a settlement recommendation from a mediator on June 20.
The valuation methods used in the settlement stipulation result in an overall settlement value of $735,266,505, consisting of $458,649,785 in returned options and $276,616,720 in returned cash or returned stock. Any fees awarded to plaintiffs’ attorneys would be deducted from the settlement amount and would reduce the amount of consideration paid to the company.
As part of the settlement, the director defendants also will permanently forego stock options for 2021 and 2022 and will not receive any further compensation for board service during those years. The board had previously adopted resolutions to forego until this month any automatic grants of annual stock option awards for outside directors for those years. Current directors also will permanently forego any compensation for board service this year.
In agreeing to the settlement, the defendants denied any wrongdoing or liability, including any allegation that they breached any duty owed to the company.
“Settling defendants also deny that Tesla or its stockholders were harmed by any conduct of settling defendants alleged in the action or that could have been alleged,” the agreement states.
In June 2017, Tesla shares were trading in the $20 range. On Tuesday, Tesla was trading at about $288 per share.
Attorneys for the Tesla defendants declined to comment on the court filing.
Lawyers for both sides are asking the judge to hold a settlement hearing on Oct. 13.
Sourse: abcnews.go.com
