Under the terms of a settlement with the Securities and Exchange Commission (SEC), Musk will be ineligible to serve as chair for three years. The deal also involves a US$40 million penalty and structural changes at Tesla.
Elon Musk’s off-hand tweets regarding taking Tesla private on August 7 have come full circle, bringing in him down as chair of the company he co-founded and led to become a symbol of disruption in the energy and transportation industries.
According to a press release last Friday by the U.S. Securities and Exchange Commission (SEC), the agency has reached a settlement with Musk by which he will step down as Tesla chair, to be replaced by an independent chair. Additionally, Tesla will appoint two new independent directors to its board, establish a new committee of independent directors and put in place controls and procedures to oversee Musk’s tweets and other communications. To top it off, both Musk and Tesla must pay $20 million each.
If that sounds severe, it bears noting that the lawsuit filed last week by SEC would have barred Musk from ever serving as a director of any publicly traded company again, plus damages.
“The total package of remedies and relief announced today are specifically designed to address the misconduct at issue by strengthening Tesla’s corporate governance and oversight in order to protect investors,” said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division.
The settlement still needs court approval.
In its suit, SEC alleged that when Musk tweeted that funding was “secured” to take Tesla private at $420 per share, that he knew that the transaction was still uncertain and subject to multiple 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,” reads the SEC’s statement.
SEC’s real beef here is that these statements caused Tesla’s stock price to jump over 6%, causing significant market disruption.
Neither Tesla nor Musk have made any formal statement about the settlement through their IR page or Twitter accounts, and the only tweet by Musk following announcement of the settlement is his retweeting the song O.P.P. by the band Naughty by Nature.
Naughty by Nature https://t.co/muZdxJWjyZ
— Elon Musk (@elonmusk) October 1, 2018
Upon news of the lawsuit last Thursday Tesla’s stock price plunged by 12%, and has fallen a little more since that time, but bounced back in pre-market trading to near Thursday levels.
In emails obtained by CNBC, Musk called on staff to ignore distractions.
We are very close to achieving profitability and proving the naysayers wrong, but to be certain, we must execute really well tomorrow (Sunday). If we go all out tomorrow, we will achieve an epic victory beyond all expectations.
As previously reported by pv magazine USA, Tesla has seen truly massive quarterly losses, even while rapidly growing energy storage deployment, and the issue of whether the company is able to achieve profitability looms large.
Source PV Magazine