Tesla's Elon Musk Muzzled, Out as Chairman, Remains as CEO - Full Details Of SEC Settlement Here
The SEC settled its fraud suit with Tesla and Elon Musk over the weekend. The settlement has many requirements, but industry analysts see the overall outcome as very positive for Tesla and its investors.
The suit revolved around Musk's tweet that he wished to take Tesla private and that he had "Funding secured." The funding Musk referred to was big oil money care of the world's largest petroleum producer, Saudi Arabi, and its state oil wealth diversification fund. In the end, Musk was either rolled by the group he thought he had secured a deal with, or the deal was never made. The SEC alleged the latter.
The terms of the settlement include the following:
- Musk will step down as Tesla’s Chairman and be replaced by an independent Chairman. Musk will be ineligible to be re-elected Chairman for three years;
- Tesla will appoint a total of two new independent directors to its board;
- Musk and Tesla will each pay a separate $20 million penalty. The $40 million in penalties will be distributed to harmed investors under a court-approved process.
- - Tesla will establish a new committee of independent directors and put in place additional controls and procedures to oversee Musk’s communications
The last point was the result of an additional charge by the SEC brought against Tesla, Inc. this weekend.
The settlement the parties have reached is now subject to court approval. “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.
“As a result of the settlement, Elon Musk will no longer be Chairman of Tesla, Tesla’s board will adopt important reforms —including an obligation to oversee Musk’s communications with investors—and both will pay financial penalties,” added Steven Peikin, Co-Director of the SEC’s Enforcement Division. “The resolution is intended to prevent further market disruption and harm to Tesla’s shareholders.”
With Musk muzzled, the twitter feed will presumably be much more restrained. Musk's other legal troubles such as the class-action suits brought by investors, his defamation suit brought against Musk by a rescue volunteer, and the Department Of Justice's investigation continue.