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Tesla investors to urge judge to reject record $7 bln legal fee in Musk pay case

Tesla investors to urge judge to reject record $7 bln legal fee in Musk pay case

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Tesla investors to urge judge to reject record $7 bln legal fee in Musk pay case

Tesla shareholders will appear in court on Monday to argue that an unprecedented request for more than $7 billion in attorneys’ fees to be paid by the company is “outlandish,” the latest twist in a legal showdown over Musk’s $56 billion pay package.

The record fee request was made by investor Richard Tornetta on behalf of three law firms that represented him, including Bernstein Litowitz Berger & Grossmann.

Tornetta owned nine shares of Tesla when he sued over Musk’s pay package of stock options in 2018, a legal battle he ultimately won in January when the package was voided.

The fee equals around $7.2 billion at Tesla’s Friday’s stock price and amounts to a rate of roughly $370,000 for every hour worked by the 37 lawyers, associates and paralegals, some of whom normally bill as little as $275 an hour, according to court documents submitted Tornetta’s lawyers.

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“The legal fees appear exceedingly disproportionate and outlandish,” Nathan Chiu, a Tesla shareholder from New Jersey, wrote to Chancellor Kathaleen McCormick in March, according to a court filing. 

Chiu, the California Public Employees’ Retirement System and more than 8,000 Tesla stockholders have flooded the Delaware Chancery Court with some 1,500 letters and objections over the fee, according to court documents.

A hearing scheduled for Monday was moved from McCormick’s usual courtroom to the largest in the building to accommodate the 47 attorneys from 19 law firms appearing in the case, as well potential stockholders.

Tornetta’s lawyers argue they deserve the fee as a cut of the benefit they say they conveyed to Tesla when a judge voided Musk’s pay package, which returned to Tesla around 266 million shares reserved for the stock options.

That stock would be worth about $67 billion at Friday’s price of $251.82 per share.Tornetta’s attorneys said it is the largest judgment ever awarded by an American court, excluding punitive damages.

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They argued they should receive a fee equal to 11% of that judgment, a percentage that is arguably conservative by Delaware legal precedent. They asked to be paid in the form of 29 million Tesla shares.

RECORD FEE REQUEST

While federal courts tend to lower the fee as a percentage of judgments or settlements as they get bigger, Delaware courts have gone the opposite way, awarding a larger percentage as an incentive for attorneys to push for a bigger recovery.

Tornetta’s legal team said they would have been justified asking for up to 33% of the value of Musk’s pay package.

The fee request vastly outstrips the current record fee in shareholder litigation of $688 million in an Enron class action, according to Stanford Law School.

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The Musk case took a dramatic turn when Tesla shareholders in June voted to ratify Musk’s pay, which Tesla has argued corrected the flaws in the 2018 process that McCormick identified in her ruling.

The company argues that Musk’s pay package has been restored and that Tornetta’s legal victory has been transformed into a loss. As a result, the case conveyed no benefit to Tesla and the shareholder lawyers should receive as little as $13.6 million, Tesla said.

Some of the shareholders who have opposed the request wrote form letters to the judge, but a few have hired attorneys to file formal objections to the fee, including Amy Steffens, a pilot, and Kurt Panouses, an attorney who specializes in representing lottery winners.

McCormick may take weeks or months to rule. The Delaware Supreme Court is currently considering a $267 million fee request in a shareholder class action involving Dell Technologies and that decision could provide fee guidance.

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Alphabet to report double-digit Q2 growth

Alphabet to report double-digit Q2 growth

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Alphabet to report double-digit Q2 growth

 Google-parent Alphabet is expected to report a nearly 14% rise in quarterly revenue, its fourth straight quarter of double-digit growth, driven by steady demand for its artificial intelligence-powered cloud computing services and an uptick in the ad market.

The search giant’s second-quarter report on Tuesday, the first among the Big Technology companies this season, could offer further insight into the uptake of AI services, as well as the rising costs associated with the new technology.

At a developer conference in May, Google widely rolled out AI-powered summaries in Search and beefed up its Gemini AI model to better compete with services from OpenAI and

Google is also launching new Pixel devices with AI capabilities next month, moving forward its unveiling event, typically set in the fall, after Apple announced in June a slew of AI capabilities and an integration with ChatGPT in the latest iPhones.

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“Investors will be looking for continued success in Search, but also for signs of the company adapting to the new world of AI,” said Gil Luria, senior software analyst at D.A. Davidson & Co.

“The company will need to show that AI is driving Google Cloud growth, that there are no share losses in Search as users start leaning more on AI chat, and that the new models being built are competitive.”

Alphabet’s AI investments will also be closely watched. In the January-March period, the company’s capital expenditure jumped 91% to $12 billion, rattling some investors even though CEO Sundar Pichai assured that the AI integrations were boosting demand for its cloud and search businesses.

Nvidia is working on a new version of its flagship AI chips that is meant to avoid U.S. restrictions on sales to China.

The company’s operating expenses in the second quarter ended June likely rose more than 32% to $27.57 billion, according to LSEG data, the highest jump in over two years.

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Investors will also have questions around reports that Alphabet is in talks to buy cybersecurity startup Wiz for roughly $23 billion and how that would affect its bottomline.

Alphabet’s core businesses are likely to report healthy growth as an improving macro-economic climate gives customers the confidence to invest in cloud computing and spend on advertising.

“Google search spending still held up fairly well … we think advertisers need to spend as a key offset to inflation,” said RBC Capital Markets analyst Brad Erickson.

Media investment firm GroupM raised its 2024 global advertising growth forecast to 7.8% in June, from 5.3% in December, primarily on account of better-than-expected spending in China and the United States.

Analysts also expect strong performance at YouTube, thanks in part to expanded monetization features in its TikTok-styled video offering, Shorts.

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Alphabet’s second-quarter cloud computing sales and advertising revenue are expected to grow 26.4% and 10.8%, respectively, according to LSEG data, largely similar to the preceding two quarters.

Ad-dependent peer Meta Platforms will report its results next week on Wednesday, July 31. 

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Delta cancels another 600 flights on Monday in wake of cyber outage

Delta cancels another 600 flights on Monday in wake of cyber outage

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Delta cancels another 600 flights on Monday in wake of cyber outage

Delta Air Lines canceled more than 600 flights on Monday, as the U.S. air carrier continued to struggle to restore operations after last week’s global cyber outage, even as other airlines were recovering from the incident.

About 16% of Delta’s flights had been canceled as of 7:00 a.m. EST, according to data from FlightAware, out of roughly 1,100 flights to or from the United States overall, the website said.

The issue has stranded thousands of Delta travelers across the United States, with some having to rent cars to drive hundreds of miles while others could have to wait days for new flights or cancel trips altogether.

The Atlanta-based airline is battling operational issues after the outage hit its crew tracking system. Delta’s total number of canceled flights since Friday has exceeded 5,000.

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A Delta spokesperson did not immediately respond to an emailed request for comment.

A software update by global cybersecurity firm CrowdStrike triggered system problems for Microsoft customers, including many airlines, on Friday.

Although other U.S. airlines have largely recovered, Delta has struggled to return to normal. American Airlines had called off 1% of its flights on Monday, while United Airlines canceled less than 1%.

Delta shares were little changed in premarket trading on Monday.

Nvidia is working on a new version of its flagship AI chips that is meant to avoid U.S. restrictions on sales to China.

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Delta CEO Ed Bastian said over the weekend that the CrowdStrike issue affected its Microsoft Windows systems, snarling a critical application.

“One of our crew tracking-related tools was affected and unable to effectively process the unprecedented number of changes triggered by the system shutdown,” Bastian told customers in an email.

In a separate note, he told employees that Delta would continue to “tactically adjust” schedules to ensure safety.

Transportation Secretary Pete Buttigieg spoke with Bastian over the weekend, according to an official, reminding him of the carrier’s responsibilities to customers and the department’s enforcement role.

CrowdStrike said a significant number of the 8.5 million affected Microsoft devices were back online. 

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CrowdStrike shares set to extend losses as outage effects linger

CrowdStrike shares set to extend losses as outage effects linger

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Shares of CrowdStrike fell 5% in premarket trading on Monday, extending their streak of losses, after several analysts downgraded the stock on concerns over the financial fallout from the global cyber outage last week.

CrowdStrike’s glitchy update to its security software affected computers powered by Microsoft’s Windows operating system, disrupting internet services across the globe and leaving people without access to banking or healthcare services.

Microsoft said on Saturday that about 8.5 million Windows devices, or less than 1% of all Windows machines, were affected.

Services across industries gradually came back online later on Friday but companies were dealing with backlogs, delays, canceled flights and other issues, raising questions on how to avoid such a situation in the future and whether such critical software should remain in the hands of a few companies.

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CrowdStrike will likely face resistance in signing new deals in the near term as a result of the anticipated fallout from the quality assurance issue which caused the massive tech outage, Guggenheim analysts said on Sunday.

“While the outage could remain a near-term overhang, we believe CrowdStrike will emerge as a stronger company as this was not a breach, but rather a significant breakdown in process,” RBC Capital Markets analysts said.

At least six brokerages have cut their price targets on CrowdStrike, with two more downgrading the stock’s rating to “neutral” from “buy”.

The outage triggered an 11% drop in CrowdStrike’s shares on Friday.

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