Elon Musk to step down as Tesla’s Chairman amidst SEC raps

Elon Musk, Chairman and CEO of Silicon Valley-based Tesla, Inc., has reached a settlement with the U.S. Securities and Exchange Commission (SEC) with regards to a controversial tweet from the tech mogul back in August. Moving forward, Musk will have to step down as Chairman of Tesla but will remain as CEO.

To recall, Musk tweeted on August 7, 2018 that he could take Tesla private at $420 per share, which was a lot less than the current trading price of the company at that time. As a result, Tesla’s stock price went up by over six percent on the same day, causing a significant market disruption.

However, SEC took action and secured a complaint against the tech giant and electric vehicle (EV)-maker, even though Musk claimed funding for the transaction had been secured, and that the only remaining uncertainty was a shareholder vote. SEC saw the tweet as misleading and subject to numerous contingencies, without specific deal terms, price, and names of potential financing partners.

Related: Tesla files patent of automatic turn signals for negligent drivers

Because of this, Musk was forced to settle with SEC to wrap up the issue. Aside from stepping down as chairman, Musk won’t be eligible for re-election as chairman for the next three years. Tesla will then appoint two new independent directors to its board, along with a committee of independent directors to control Musk’s communications, including his previous tweets.

Most importantly, Musk and Tesla have been fined $20-million each for a total of $40-million, which will be distributed to the harmed investors under a court-approved process.

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.

Stephanie Avakian
Co-Director of the SEC’s Enforcement Division

Musk and Tesla have agreed to settle the charges without admitting or denying the allegations. Initial investigation of the SEC charges will commence by February, which will coincide with a current open investigation by the U.S. Department of Justice.

Source: U.S. SEC via The Verge