SEC settles with Tesla’s Elon Musk, will remain CEO but relinquish board chair and pay $20M fine

FAN Editor

The Securities and Exchange Commission settled charges with Tesla CEO Elon Musk over his aborted bid to take the company private, with the billionaire remaining as the helm of the company but relinquishing his chairman title and getting slapped with a hefty fine.

The SEC’s enforcement action brings to a conclusion a saga which began in early August, when Musk announced via Twitter that he had secured enough funding for a massive private buyout of Tesla. The original SEC complaint alleged that in doing so, Musk issued “false and misleading” statements, and failed to properly notify regulators of material company events.

As part of the settlement, which is still subject to court approval, Musk will also pay a civil penalty of $20 million and give up his role as chairman of the board for at least three years. Additionally, the SEC imposed a $20 million fine on Tesla itself, which will also be expected to appoint two new independent directors to the board.

“Musk tweeted on August 7, 2018 that he could take Tesla private at $420 per share — a substantial premium to its trading price at the time — that funding for the transaction had been secured, and that the only remaining uncertainty was a shareholder vote,” regulators said on Saturday.

However, “in truth, Musk knew that the potential transaction was uncertain and subject to numerous contingencies. Musk had not discussed specific deal terms, including price, with any potential financing partners, and his statements about the possible transaction lacked an adequate basis in fact,” they added.

On the day Musk made the surprise announcement, Tesla’s stock surged by over six percent — catching off guard the bearish class of investors with whom the billionaire has crossed swords in the past.

Musk’s prolific use of Twitter has created several high-profile headaches for him personally, as well as the company he founded. In settling the charges, regulators faulted Tesla for not exerting more control over Musk’s tweeting.

“The SEC also today charged Tesla with failing to have required disclosure controls and procedures relating to Musk’s tweets, a charge that Tesla has agreed to settle,” the agency said in a statement.

“The settlements, which are subject to court approval, will result in comprehensive corporate governance and other reforms at Tesla—including Musk’s removal as Chairman of the Tesla board—and the payment by Musk and Tesla of financial penalties,” it added.

Musk’s fierce war of words against short-sellers, or investors betting on the company’s stock to fall, was one of the reasons he cited when he first floated the idea of Tesla going dark. In settling with Musk, the SEC said Tesla’s board would be expected to “oversee” its founders communications with investors.

“The resolution is intended to prevent further market disruption and harm to Tesla’s shareholders,” added Steven Peikin, co-director of the SEC’s Enforcement Division, in a statement.

Tesla’s stock, traded on the Nasdaq, closed down around 14 percent on Friday at $264 per share.

Free America Network Articles

Leave a Reply

Next Post

Documentary "Love, Gilda" recalls the beloved comedian's all-too-brief life

“Saturday Night Live” launched the careers of some of comedy’s biggest stars, including Gilda Radner. Remembering the comedian is the mission of a new documentary, “Love, Gilda.”  Her brave but losing battle with cancer still inspires countless fans, including our Dr. Jon LaPook: Gilda Radner was one of television’s most […]