Tom Hals

(Reuters) – Elon Musk’s takeover of Twitter for $44 billion is providing ammunition for a pending trial in which an investor will argue that Tesla’s CEO pay of $56 billion (NASDAQ:) Inc was a waste of time and did not secure his full-time employment.

Deal for Twitter Inc One shareholder attorney said that the potential distraction Musk could experience from Tesla (NYSE:) will be an integral part of the trial scheduled for October.

According to the lawsuit, Musk is accused of creating the 10-year contract and Tesla Board rubber stamped it in 2018. The celebrity CEO did not have to devote his time to Tesla.

Take a look at the majority of CEO contracts. “The first sentence of most CEO contracts states, “You’re going be a fulltime CEO and will devote substantial time to the affairs and business of the company.” That’s standard,” said Greg Varallo of Bernstein Litowitz Berger & Grossmann, the firm that is leading the case against the pay deal.

Musk and Tesla have not responded to inquiries for comment. The defendants claimed in court papers that the plan was well-crafted and approved by stockholders. They also stated that it has yielded unprecedented returns for investors.

Tesla stock fell more than 20% after Musk revealed that he took a 9% share in Twitter April 4. This was partly due to concerns Musk was being distracted by problems with the supply chain for electric vehicles.

The multitasking entrepreneur, who is also a chairman at rocket company SpaceX and founder of The Boring Company, has his own startup, Neuralink. He has stated that he wants to colonize Mars.

Tesla’s 2018 pay package provides stock options for companies that meet increasing financial goals. The company stated this would encourage his leadership. Tesla would have to meet all “stretch goals” in order for the plan to be worth $56 billion. But, Tesla’s stock price rises, so will the plan’s overall value.

According to Equilar research firm Amit Batish, Musk’s stock vesting under this plan amounts to around $75 billion. He estimates that this is 35 times the total value of 100 top CEO pay packages beginning in 2021.

Richard Tornetta, shareholder, filed a lawsuit against Delaware’s Court of Chancery alleging that the package was not necessary. Musk owned 22% of Tesla at that time, which gave him ample incentive to succeed with the company.

Tornetta wants to end the plan and any stock options that have been granted.

Musk uses his Tesla stock for collateral to get loans to purchase Twitter.

Musk and Tesla directors claimed in court filings the that Tesla’s pay package achieved what it was intended to — align Musk’s incentives with shareholders, and create value

“Since it was implemented, Tesla’s value has increased by more than 1,800% from about $53 billion to over $1 trillion,” the filing said. Musk is still far from reaching all milestones despite its incredible value increase.

The March 2018 shareholder approval of the package was “challenging” according to securities filings.

Plaintiffs argued that shareholders had to know before voting whether management believed certain milestones could be met. The suit was described by the court as materially misleading.

In court papers, Tesla countered that internal projections were not stretch targets.

“Nothing that Elon touches or does is not bold and super stretched and aggressive,” Tesla’s former chief financial officer, Deepak Ahuja, testified in a deposition in the case, according to a court filing.

The trial, despite the outrageous size of the pay package, will hinge on directors’ thinking and the statements made by the board to shareholders prior to the vote.

Minor Myers, University of Connecticut School of Law professor said: “No one could’ve looked into the crystal ball and seen Twitter” “But they could have negotiated for some measure of Musk’s time at Tesla.”

It is expected to start on Oct. 24, in Wilmington, Delaware, and will last for five days.