Elon Musk’s entrepreneurial journey began with Zip2, a software company he co-founded with his brother in 1995. The early days were tough, with Musk even sleeping in the office due to financial constraints. After four years, they sold Zip2 for $307 million, allowing Musk to pocket $22 million. He then invested $12 million in X.com, which later became Paypal and was subsequently sold to eBay for $176 million. With his newfound wealth, Musk went on to establish SpaceX and acquire a majority stake in Tesla for $6.35 million.
Over the years, Musk has made significant investments in Tesla, totaling around $300 million. Despite receiving no substantial salary or bonus, he has been granted lucrative market-based options tied to ambitious performance targets. One notable instance was in 2009 when he was awarded over 8% of Tesla’s shares, which he later exercised for a gain of $1.34 billion. Subsequent options granted in 2012 and 2018 further boosted his stake in the company, with the latter facing scrutiny for its exorbitant value and lack of corporate governance.
In a controversial turn of events, a Delaware court rescinded Musk’s 2018 option in January 2024, citing poor governance and the undue influence he exerted over Tesla. The court highlighted Musk’s control over the pay process and questioned the independence of the company’s directors. Despite facing legal challenges, Musk’s desire for greater voting control over Tesla remained a point of contention among shareholders.
The ongoing power struggle within Tesla has raised concerns about Musk’s leadership style and potential conflicts of interest. Allegations of diverting resources to his other ventures and questionable social media behavior have further fueled the controversy surrounding his role in the company. The Delaware court’s decision to void his 2018 option has cast doubt on Tesla’s future trajectory and raised questions about corporate governance practices within the organization.
Looking ahead, Tesla may explore various options to address the voided option, including share buybacks or issuing new shares to Musk. However, the recent surge in Tesla’s stock price has significantly increased the potential value of Musk’s remaining options, posing a challenge for the company’s decision-making process. As the saga unfolds, the implications of Musk’s influence over Tesla and the broader implications for corporate governance continue to be a topic of debate in the business world.