Elon Musk and X Corp have reached a tentative settlement to resolve a class action by former Twitter employees over unpaid severance tied to the 2022 takeover and mass layoffs. The lawsuit had sought $500 million and was led by ex-employees Courtney McMillan and Ronald Cooper.
The workers alleged Twitter’s 2019 severance plan entitled most staff to two months’ base pay plus a week per year of service, and senior managers to six months, while many received little or none after Musk’s acquisition and rebrand to X. Roughly 6,000 roles were cut during the transition, according to contemporaneous reporting and the complaint’s framing.
The Ninth Circuit has postponed a Sept. 17 hearing to allow the parties to finalize terms. Importantly, the filing does not disclose the settlement amount.
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The deal, once papered and approved by the district court, would end the appeal and resolve the litigation in full. Separate lawsuits by other former executives remain pending, so this settlement, while material for rank-and-file staff, does not fully clear X’s employment overhang.
Is Tesla footing the bill?
The settlement revives questions about who pays and how. The defendant is X Corp, not Tesla, but investors often connect any large cash obligations to Musk’s personal liquidity. Earlier this month, Tesla’s board approved a new stock award worth about $29 billion—96 million shares at a $23.34 strike—intended to keep Musk focused on Tesla as the 2018 package remains under appeal in Delaware. It is worth noting that the award underscores a compensation structure heavy in equity, not cash.
Musk has historically used share-backed borrowing rather than selling stock. Tesla’s SEC filings indicate he has around 236–238 million Tesla shares pledged as collateral for personal loans, a point relevant to any near-term cash needs that might arise from settlements elsewhere in his business empire.
This comes integral to the discussion as X Corp is perceived to be struggling with revenue streams and liquidity. Last year, a Kantar survey found that approximately one-quarter of advertisers expect to cut back their spending on the platform.
Last month, Linda Yaccarino, who was pulled in as CEO of X to drum up advertising streams, stepped down from the position. Her exit comes just as the company readies X Money, bets on AI-generated feeds, and seeks to lure back blue-chip advertisers wary of brand safety blow-ups.
The settlement headlines capped a week where a Texas federal judge refused to dismiss a separate proposed class action alleging Musk’s America PAC misled voters with a “$1-million-a-day” petition giveaway during the 2024 election cycle. Judge Robert Pitman found plaintiffs plausibly alleged an illegal lottery and deception, sending the case to discovery.
Also this week, a California federal judge certified classes allowing Tesla drivers to pursue claims that the company and Musk overstated Full Self-Driving capabilities for years—another potential liability vector and reputational drag for Tesla’s core business.
Information for this briefing was found via The Independent and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
