A Delaware decide dominated Tuesday that Elon Musk’s $56 billion pay bundle is unfair, voiding the biggest in compensation deal in company historical past.

The choice, issued Tuesday within the Delaware Courtroom of Chancery by Decide Kathaleen McCormick, implies that Musk, the world’s richest individual, can’t hold the 2018 compensation bundle. The ruling might be appealed. Chancery Day by day, which follows and shares replace on the Delaware Chancery Courtroom, first reported the choice on Threads.

The ruling doesn’t present a tidy finish for Musk or the Tesla board. How Musk is compensated and what occurs to his wealth, which is essentially tied up in his many firms, are unanswered questions.

In her ruling, McCormick wrote that Tesla “bore the burden of proving that the compensation plan was truthful, and so they failed to fulfill their burden.”

Musk shared his displeasure with the ruling by turning to X, the social media website previously generally known as Twitter that he owns thanks partially to a earlier determination by McCormick. The decide oversaw Twitter’s go well with in opposition to Musk that resulted in him agreeing to shut his $44 billion deal. Musk largely financed the Twitter acquisition by promoting his Tesla inventory.

“By no means incorporate your organization within the state of Delaware,” Musk posted on X. Musk later posted a ballot asking whether or not Tesla ought to change its state of incorporation to Texas.

This query of “equity” was central to the case, which kicked off in 2019 when Tesla shareholder Richard Tornetta filed a go well with to rescind Musk’s 2018 pay deal, claiming on the time that the bundle was unjustly paid to Musk with out demanding he focus totally on the carmaker.

The compensation plan accepted by shareholders in 2018 consisted of 20.3 million inventory possibility awards damaged up into 12 tranches of 1.69 million shares. Beneath the settlement, the choices vested in 12 increments if Tesla hit particular milestones on market cap, income and adjusted earnings (excluding sure one-time fees similar to inventory compensation).

Whereas many could argue that it was truthful as a result of the overwhelming majority of shareholders accepted it, McCormick was unmoved. She wrote as a result of the “defendants have been unable to show that the stockholder vote was totally knowledgeable as a result of the proxy assertion inaccurately described key administrators as unbiased and misleadingly omitted particulars concerning the course of.”

McCormick described the method resulting in the approval of Musk’s compensation plan as “deeply flawed,” largely due to his deep ties to the individuals, together with board members, who have been purported to be negotiating on Tesla’s behalf. She additionally famous that testimony illustrated that this was much less a negotiation and extra a cooperative enterprise.

McCormick additionally weighed within the equity of the “worth.” Defendants urged the courtroom to match what Tesla “gave” in opposition to what Tesla “received.” Her evaluation was not sufficient. She writes: