Well, a democratic judge just told Elon Musk his $55 billion paycheck is worthless. Yeah, that's essentially exactly what just happened. Elon Musk with a board that he had close relations with at least according to the judge, had a 21 approximately perent ownership in Tesla at the time that he was granted options to control an extra 6% of Tesla if he grew Tesla's market cap by $600 billion. The arrangement was nicknamed 6% for $600 billion and the argument was, hey, the stock plan was approved by the majority of the shareholders, not including Musk, the majority of the minority that's known as well.

The judge decided hey, was the board actually impartial in balancing their favoritism for Elon Musk with balancing their fiduciary obligation to shareholders. Did the board make the right decision and evaluating whether or not the board made the right decision? The judge had to decide how much time does Elon Musk spend at Tesla Oh, interesting, he's spending most of his time at Twitter before the trial. Oh interesting, he's spending about half of his time at SpaceX and half of his time at Tesla Before that Hm. did the board negotiate any time commitments with Elon Musk Hm.

These are some of the comments that the judge made in their ruling against Elon Musk ultimately arguing that the world's in their quote, richest person in the world although I think Lvmh's owner just took that Uh title. But anyway, well, probably certainly after today's ruling. But anyway, was the world's richest person overpaid again Elon Musk was offered 12 tranches TW for Uh and and then ultimately that would have added added up to Uh an additional 6% in ownership for Tesla And ultimately the judge ruled that this was not a fair Compensation Plan given that it was 33 times larger than the plan's closest comparison 250 times larger than any similar comparison plan. The judge was appointed, the judge whose name is Kathleen McCormick also going by Kathleen St Jude McCormick born 1979, an American lawyer sitting on the Delaware Court of Chancery appointed by a Democratic governor in 2018 Governor John Carney McCormack The judge went to Harvard University for her Ba and got her JD from Notre Dame decided that a review of the fairness of the plan failed to meet the burdens required and that the entire plan is essentially rescinded because Musk had too much control over Tesla for his stock comp plan to be considered fair and therefore the entire plan is trashed.

So now the question is and I'll show some more highlights here. But now the question is what happens now Elon Musk has already responded with a tweet saying basically never incorporate your business in Delaware which is a place most corporations go to incorporate. He quotes uh, well, he tweets I quote never incorporate your company in the state of Delaware Very verbose here. But anyway, the question now is what ends up happening.

Well, in my opinion, ownership of Elon has to be transfer or by Elon in Tesla has to be transferred to shareholders which means less dilution for shareholders. That should be good for shareholders. However, it's probably going to be seen as bad since people don't know what Elon's going to go do next. So we wrote down some options here.

Will a new stock comp plan be selected? Probably. Yes. Will that stock comp plan be greater than what the old one was? Probably not. Given that the old one was deemed unfair at 55 bill, it's probably going to be less than that.

Option Number two is Elon gets nothing, but that would probably also be unfair. So the reality is Elon will probably have to negotiate with the board of directors and document this negotiation. Some kind of stock Compensation Plan that is between zero and $55 billion. This is basically a democratic judge saying you deserve less pay and the shareholders deserve more of that ownership.

Okay, fine, so half if let's say you go with a number in the middle is about $27.5 billion. Could that be deemed reasonable? Maybe. But that does mean Elon Musk Unless he wants to buy back the shares, it does mean Elon Musk's ownership in Tesla would go down. Elon Musk has recently complained that he actually wanted his voting rights in Tesla to go up to about 25% Well, now they're going down.

They're going in the opposite direction. So maybe we're going from 13 to 177% with options down to maybe 7 to 11% with options. So Elon Musk's ownership might be a lot closer to 10% after this is all said and done, plus whatever kind of new plan could occur. Uh, now that would mean shareholders would essentially have greater control over Tesla than Elon Musk There is no dual class of voting, so you can't really solve the problem by saying okay, Elon we'll give you less pay, but you keep control I Don't know if that can exist.

Not even Elon thinks that can exist. Elon has made it clear in his earnings call that he's not looking for more economics. in other words, more pay. although that could just be PR given that that trial was going on at this time and instead he just wants to keep voting ownership.

Well, now the opposite is happening. So the question is, what can happen. Well, there are a few paths. Number one, you can appeal.

probably won't go anywhere, but you can appeal. Maybe they'll appeal to Kick the Can out the road. Number two: you come up with a new plan and that's any kind of new plan is just going to take money from Elon and give it to anyone holding Tesla shares. That's basically what this is.

Money goes from Elon's pocket to Tesla shareholders. That's how it works. However, why is the stock going down? Well, the Stock's probably going to go down on this news because as I wrote here from the POV as a shareholder, this is good asterisk because what if Elon loses it. In other words, he does something rash like now.

I'm going to take my Ai and take it away from Tesla. We're going to take Optimus away from Tesla. Well, then he'll get sued for that, but he might do it. Oh, we're going to take FSD away from Tesla.

Well, he get sued for that, but he might do it. Oh, we're going to develop less AI at Tesla he'll get sued for that, but he might do it. The point is, nobody knows and what does the stock market hate my friends. It is simple we talk about in the stocks and psychology of money course and the gold courses.

Link down below with a coupon code expiring tomorrow January 31st at midnight. Email us at Staff Kevin.com for coupon codes sorry I had to I had to throw one in there. Um, Dos hate uncertainty Elon Musk and Tesla are probably two of the most uncertain entities that exist. There is a lot of volatility that exists in my opinion and I'm sorry for Elon but this is good for Tesla shareholders and no stop this nonsense folks.

Tesla does not have 29 billion in free cash available I'm really honestly exhausted by hearing this. People Do Not read financial statements. That's how I know you're not a course member because if you were a course member, you would have already read these financial statements. It's okay.

Whatever. I'll do it for you. Okay, I'll do it for you. It's very simple, my friends.

You go to the financial statements. Okay, you go to, uh, our actual financials. And when we go to our financials, what we're going to look for is, we're going to look for the balance sheet and then over here you're going to go. But Kevin We've got about $28 billion in cash and short-term Investments Correct.

But what do you think that money gets used for? Well, those that money is offset. Sorry, there we go. That off that money is offset by $14 billion in bills. not only $14 billion in accounts payable, but acred liabilities of nine.

So we've got 14.4 billion to pay. We've got uh, nine. in, uh, in in accured liabilities. We've got 14.4 in payables.

So we've actually got 23.4 billion in bills. We've got debt that's due of $2.3 billion this year. That's $25.7 billion. Okay, then we've got long-term debts of $8.1 billion.

So if you think about it, there's actually more debt at Tesla than there is cash. Now the good news is Tesla is free cash flow Positive. Okay, so what you could do is you could calculate the free cash at Tesla by taking $29 billion of cash minus out the pay abl and current liabilities I'm not even minusing out deferred revenue. Okay, that brings you to about $3.3 billion of free cash.

Okay, cash we don't actually need. And now you could add about $1 billion of free cash. flow per quarter. Yes, you could do that.

Sure, Tesla's got three to four billion dollars of cash sitting around great, but is that 29? Bill No. Sorry. Like anybody who tweets that just doesn't understand. but whatever it's it's okay.

It's okay. Again, their cash free cash flow is growing, so the amount of free cash they have is going up. But if they paid all the bills that they owe right now, they only have like $3 billion left, so just don't work that way. It's okay.

whatever. So uh, but anyway. Okay, so um, let's look at some quotes. Some summary quotes from the actual uh, legal opinion, so inaccurately describing key directors as independent is considered misleading and omitted details about the process.

This is in the voting, so the judge is arguing that the Voting is not fair. Uh, no meaningful negotiation over any terms of the plan. That was another slam from the judge. Increase the discount on the publicly disclosed Grant PR So in other words, the options pricing was a little convoluted.

uh, at a high level. 6% for 6 billion has a lot of appeal. However, Elon already had 21.9% so Elon stood to gain 10 billion for every 50 billion in market cap. Was the plan even necessary to retain? Elon Musk That's a question.

Made no effort to give a reasonable explanation for the 1% plan. Trial took place over 5 days. The plaintiff is entitled to recision basically a cancellation of the stockhom plan. Here we go.

talking about Musk divided his time between SpaceX and Tesla. He increased his amount of time at Tesla at the end of 2017. but then you balance that with uh, how much time Elon spent at Twitter. So the judge is really trying to hammer him and in as many places as possible here.

Uh to to Really balance out this argument that uh, see, there was no negotiation over the size of the grant. Here's another one where we have whether Musk should commit any level of time to Tesla didn't come up. None of the participants raised the issue. So a lot of Slams on uh on on Elon here and therefore the case ends with the judgment is entered into the plaintiff's favor.

Tesla Shares are almost down 4% Remember, we do have a Uh A level. We have a Um support at about 175 to 178. So very interesting. Elon Probably knew this ruling was coming.

that's why he brought up voting rights I agree with you I think Elon probably did know that this was coming. So very interesting. Very, very very, very interesting. Anyway, so that's your summary.

Again, yes it is true Democratic Judge rules against Elon That is true. We know that that is well, at least judge appointed by a Democratic governor uh who went to Harvard and Notre Dame uh ruled against Elon Yes, that is true and is this probably long-term benefit to Tesla shareholders? Yes, because I actually have a strong belief that Elon is not going to go off the deep end over this. However, people will still price in that risk and that's why I think the share price is down? Keep in mind, most of this liquidity here is, uh, retail selling. Probably not understanding really what's going on.

and so who knows the stock could go up more or down more tomorrow. Nobody knows. It depends how institutions want to react tomorrow. So anyway, there you have it.

Thanks so much for being here! Make sure to check out the programs on building your wealth and meet Kevin and email us at Staff Kevin.com should you have questions. Thank you so much and we'll see. why not advertise these things that you told us here. I Feel like nobody else knows about this? We'll We'll try a little advertising and see how it goes.

Congratulations man, you have done so much People love you people look up to you Kevin P there financial analyst and YouTuber meet Kevin Always great to get your take even though I'm a licensed financial adviser, real estate broker and becoming a stock broker. This video is neither personalized Financial advice nor real estate advice for you. It is not tax, legal or otherwise personalized advice tailor to you. This video provides generalized perspective, information and commentary.

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