Musk's 2018 Tesla pay package: how the eight-year court fight ended, and what it changed

For most of the past eight years, Elon Musk's 2018 Tesla pay package was a legal question rather than a payout. In 2026 that finally changed: the options have been exercised and the court case is closed. Here is how it ended, and what it left behind.

The award

In January 2018, Tesla's board granted Musk a 10-year, performance-based option award on about 304 million shares (split-adjusted), roughly 9% of Tesla's stock today. Tesla estimated its value at about $56 billion when it was approved; with the rise in Tesla's share price, Al Jazeera put it at about $120 billion by early November 2025. Musk only received the options if Tesla hit market value and operating targets, which it did. He has not received a salary from Tesla in years.

The court fight, step by step

• June 4, 2018: shareholder Richard Tornetta, who owned nine Tesla shares, sued Musk and the board in Delaware's Court of Chancery.
• January 30, 2024: after a trial, Chancellor Kathaleen McCormick ordered the award rescinded. She found the directors were conflicted and that key facts were not properly disclosed to shareholders.
• 2024 annual meeting: Tesla shareholders voted to ratify the award again.
• December 2, 2024: the court refused to change its ruling and awarded the plaintiff's lawyers $345 million in fees. Tesla and the directors appealed.
• August 3, 2025: while the appeal was pending, Tesla's board gave Musk an interim award of 96 million restricted shares, designed to fall away if the 2018 award was restored.
• December 19, 2025: the Delaware Supreme Court reversed the lower court. It said rescission was the wrong remedy, awarded Tesla nominal damages of $1 and cut the legal fees.
• March 18, 2026: the final judgment set the lawyers' fees at about $65 million, including costs and interest.
• April 2026: the 2025 interim award was forfeited in full, and Tesla and Musk signed an agreement on how the 2018 options would be exercised.
• June 16, 2026: Musk exercised all 303,960,630 options, leaving him with 286,428,773 restricted shares after Tesla withheld shares to cover the exercise price.

The new strings attached

The April 2026 agreement added a condition the original award did not have. The shares only vest if Musk stays CEO, or an executive responsible for product development or operations, until January 19, 2028. The award's five-year holding period also only starts on that vesting date. Until then the shares carry full voting rights, which is why Musk's stake jumped to 19.8% in Tesla's latest proxy statement.

What the case changed

The fight had effects far beyond one pay package. After the 2024 ruling, Musk accused Delaware's judges of being hostile to founders and urged companies to leave the state. Tesla has since moved its legal home to Texas, and companies including Dropbox, Roblox, The Trade Desk and Coinbase also moved to Texas or Nevada, although Delaware remains by far the most popular home for US public companies.

Texas law also lets Tesla require shareholders to own at least 3% of the company before they can sue on its behalf over alleged breaches of corporate law. A case like Tornetta's, brought by an investor with nine shares, would be much harder to start today.

Two ways to read it

Supporters say the Supreme Court ruling simply honored a deal that shareholders approved twice and that Tesla's results justified. Critics say the original trial showed real weaknesses in board independence, and that the move to Texas makes it harder for small investors to challenge decisions. Both sides agree on one thing: the ruling removed a major uncertainty that had hung over Tesla's governance since 2018.

What to watch next

The December 3 shareholder meeting, the January 2028 vesting date, and how Tesla's board handles Musk's much larger 2025 award as its milestones come into reach.

This article is for information only and is not financial advice.