On Saturday, Elon Musk, co-founder and CEO of Tesla, agreed to step down as chairman of the company in a settlement with the Securities and Exchange Commission (SEC). The settlement came as a resolution to a lawsuit filed Thursday by the SEC.
According to the SEC, Musk committed fraud by lying to investors when he tweeted the following:
Am considering taking Tesla private at $420. Funding secured.
— Elon Musk (@elonmusk) August 7, 2018
Musk, according to the lawsuit, told Tesla’s board of directors the $420 figure was based on a 20 percent premium to the stock’s Aug. 2 closing price. Musk then rounded the price up to $420 due to its connection with marijuana smokers, thinking it would be funny.
Witnessing Musk’s immature actions, the SEC sought to enact draconian measures by banning Musk from serving as chief executive of any public company, but were unable to finalize such terms.
Under terms of the settlement, both Musk and Tesla will pay $20 million in fines, distributed to investors harmed in the process. Tesla will also add two new independent directors to its board.
Musk also must wait three years to be eligible to serve as chairman again and will be monitored on social media to ensure no repeat actions occur.
Stephanie Avakian, co-director of the SEC’s Enforcement Division, stated:
“The conditions of the agreement are specifically designed to address the misconduct at issue by strengthening Tesla’s corporate governance and oversight in order to protect investors.”
Earlier in the week, Musk responded to the lawsuit, describing it as an “unjustified action,” which left him “deeply saddened and disappointed.”
Musk further stated: “Integrity is the most important value in my life and the facts will show I never compromised this in any way.”
Musk, 47, may not have intended to mislead investors, but it cannot be denied his immature actions negatively impacted Tesla.
Hopefully Musk will think again the next time he considers releasing inside information which may affect his company’s share price.
[CNN] [ Washington Post] [Photo courtesy Bloomberg via Getty Images]