On Monday, Delaware chancery court judge Kathaleen McCormick informed defendants including Musk, his fellow directors, and the company itself, that they had failed collectively to inform Tesla owners their CEO was allowed to dictate the terms of his own compensation.

Her final ruling on the matter voids the previous 2018 shareholder approval, which granted him options convertible into 304 million shares of the company at a 93% discount to the current price.

The carmaker said it would now take its case to the Delaware Supreme Court, arguing her judgment wasn’t just preventing Musk from receiving what was rightfully his.

Far worse McCormick was, in fact, cheating out shareholders from awarding him the package in the first place.

At Monday’s $357.09 per share closing price, it is worth a net $101 billion after factoring in the cash needed to exercise the options.

“A Delaware judge just overruled a supermajority of shareholders who own Tesla and who voted twice to pay Elon Musk what he’s worth,” the company said on Monday. “The court’s decision is wrong, and we’re going to appeal.”

Compensation challenges

Musk’s unprecedented net worth, exceeding $335 billion, complicates the design of a new pay package.

The original 2018 deal required Tesla to expense $2.3 billion, a massive sum for most CEOs but relatively insignificant for Musk today.

Judge McCormick criticized Tesla’s board, including chair Robyn Denholm, for failing to act independently in 2018.

Denholm, who has sold over $75 million in Tesla shares this year, testified her Tesla role provided “life-changing wealth.”

Fallout in Silicon Valley

The ruling has sparked debate over Delaware’s status as the premier state for corporate incorporation.

Critics, including venture capitalist Bill Gurley, warn the decision could push companies to relocate to states like Nevada, seen as more business-friendly.

Gurley called the Musk package “one of the most shareholder-aligned incentive deals ever” and argued Tesla’s meteoric rise since 2018 proves it wasn’t excessive.

“This is a victimless crime, and that’s the thing that makes Delaware look like a kangaroo court,” he added.

Next steps for Tesla

Tesla’s appeal to the Delaware Supreme Court faces long odds. Judge McCormick dismissed the June ratification vote as insufficient to remedy earlier fiduciary failures.

Some analysts believe the case could escalate to the U.S. Supreme Court, where a conservative majority may be more sympathetic to Tesla’s arguments.

Tesla’s stock closed Monday at $357.09, with Musk’s contested options still hanging in the balance.