The $345 Million Side Hustle

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Here’s a good side hustle:

Step 1: Buy a few shares of random companies.

Step 2: Tell a few law firms exactly which companies you own.

Step 3: Have the lawyers contact you if they ever find a reason to sue one of those companies.

Step 4: Since you’re a shareholder, they’ll put your name on the lawsuit.

Step 5: You’ll likely have to sign a bunch of paperwork and maybe show up to court (full disclosure I’ve never done this), but after that you basically just stay out of the way and get a cut of the lawyer fees if they win.

This is what Richard Tornetta did to Elon Musk and Tesla in 2018.

Tornetta is a former heavy metal drummer that now makes and sells light-up LED mohawks. He has next to zero investment or legal experience, yet owned 9 shares of Tesla valued around $2,000 at the time.

A few lawyers then decided to sue Elon Musk over an “excessive pay package.”

They used Richard Tornetta’s name on the paperwork since he was an actual Tesla shareholder (9 shares!) in exchange for him getting paid out if they won.

Well, this week they won… again.

Elon Musk’s record-setting Tesla Inc. pay package was struck down once again by a Delaware judge, threatening to wrest billions of dollars from the world’s richest person and one of Donald Trump’s closest confidants.

Delaware Chancery Court Judge Kathaleen St. J. McCormick ruled this week that Tesla’s board was improperly influenced by Musk when it adopted the billionaire’s plan in 2018. It was the second time she rejected the pay package as excessive, sticking with her original finding in January even after shareholders backed the plan and Musk asked her to reconsider.

Basically, Elon was granted stock options in 2018 when Tesla was valued at $60 billion.

Depending on how he ran the company over the next 10 years, he could’ve been granted more options, plus the value of those options could increase as well.

If the company ever reached a market cap of $650 billion (~11x its 2018 value), he’d earn the max number of stock options.

Well, Tesla hit a $1.2 trillion market cap in 2021 so Musk got the max number of stock options, which as of today would be valued at $101 billion.

The Delaware court first sided with Tornetta’s team of lawyers in January, saying that Tesla’s board of directors was improperly influenced by Musk. In other words, Tesla’s board of directors was comprised of Musk’s friends and family members, who didn’t really have the best interest of shareholders.

Tesla appealed and even had a second shareholder vote on Musk’s pay package. Shareholders overwhelmingly approved it again.

Yet, this week judge Kathleen McCormick still sided with Richard Tornetta’s team of lawyers.

Now Tesla has to go back to the drawing board.

How do they pay Elon Musk for the incredible work he’s done at Tesla since 2018?

Do they pay Elon Musk for the incredible work he’s done at Tesla since 2018?

If they don’t pay him, what does this mean for Elon Musk and Tesla going forward?

As a matter of principle, I believe they should pay Elon Musk for his work.

But stepping back, both Tesla and Elon Musk got exactly what they wanted even without the $101 billion in stock options being granted – Tesla became a trillion company and Elon is the richest person in the world by over $100 billion.

What’s funny here are a few things:

1. CEO pay is a growing topic of debate. Tornetta v Musk will be cited as a precedent and probably studied in law classes for decades. Of course, Tornetta just happens to be a former heavy metal drummer that now makes and sells light-up LED mohawks.

2. Elon probably deserved this pay package. He took Tesla from a $60 billion company in 2018 to a $1.2 trillion company in 2021. Seemingly very few people could do this. Plus, he’s got five other major companies. You’ve got to keep him interested in Tesla somehow. Paying him is a good way to do that.

3. The argument against Elon’s pay package was that it was excessive and at the expense of shareholders. Yet, the lawyers who won the case requested Tesla pay them a $5.6 billion fee. That also seems excessive and at the expense of shareholders. (They settled on $345 million.)

This entire lawsuit was clearly a guise for lawyers to get rich quick.

It turned into one heck of a lucrative side hustle for Richard Tornetta, though.

Now he can get back to his full time job selling LED mohawks.