DOVER, Delaware (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 lawsuit from shareholders alleging they unjustly enriched themselves with excessive compensation.
The proposed settlement was outlined in documents filed Friday night in the Delaware Court of Chancery and is subject to court approval. The settlement does not include claims involving another lawsuit by Tesla shareholders, including a separate lawsuit in Chancery court challenging a 2018 compensation award to CEO Elon Musk that is potentially worth more than $55 billion. A decision in this 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 City of Detroit Police and Fire Retirement System, a retirement fund that has invested in Tesla and challenged stock options. purchase of shares granted to directors of the company from June 2017.
The settlement agreement asks the defendant directors, 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 shares and unexercised stock options. The total value is based on a settlement stock price of $260.54, which was Tesla’s closing stock 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 aggregate settlement value of $735,266,505, consisting of $458,649,785 in returned options and $276,616,720 in returned cash or returned shares. Any fees awarded to plaintiffs’ attorneys would be deducted from the settlement amount and reduce the amount of consideration paid to the company.
As part of the settlement, the defendant directors will also permanently waive stock options for 2021 and 2022 and will not receive any other compensation for their service on the board during those years. The board had previously passed resolutions to waive until this month any automatic grants of annual stock option grants to outside directors for those years. The current directors will also permanently waive any compensation for board service this year.
By agreeing to the settlement, the defendants denied any wrongdoing or liability, including any allegation that they breached any duty to the company.
“The settlement defendants also deny that Tesla or its shareholders were harmed by any conduct of the settlement defendants alleged in the action or that may have been alleged,” the agreement reads.
In June 2017, Tesla shares were trading around $20. On Tuesday, Tesla was trading at around $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 October 13.