Musk out as Tesla chair, re­mains CEO in $40M SEC set­tle­ment

China Daily (Latin America Weekly) - - Holiday - AP— AFP

WASH­ING­TON — Tesla and its CEO, Elon Musk, have agreed to pay a to­tal of $40 mil­lion and make a se­ries of con­ces­sions to set­tle a govern­ment law­suit al­leg­ing Musk duped in­vestors with mis­lead­ing state­ments about a pro­posed buy­out of the com­pany.

The set­tle­ment with the Se­cu­ri­ties and Ex­change Com­mis­sion al­lows Musk to re­main CEO of the elec­tric car com­pany but re­quires him to re­lin­quish his role as chair­man for at least three years.

Tesla must hire an in­de­pen­dent chair­man to over­see the com­pany, some­thing that should please a num­ber of share­hold­ers who have crit­i­cized Tesla’s board for be­ing too be­holden to Musk.

The deal was an­nounced on Satur­day, just two days after the SEC filed its case seek­ing to oust Musk as CEO.

Musk, who has an es­ti­mated $20 bil­lion for­tune, and Tesla, a com­pany that ended June with $2.2 bil­lion in cash, each are pay­ing $20 mil­lion to re­solve the case, which stemmed from a tweet Musk sent on Aug 7 in­di­cat­ing he had the fi­nanc­ing in place to take Tesla pri­vate at a price of $420 per share.

“A reck­less tweet cost a lot of money — the $20-mil­lion tweet,” said Michelle Krebs, ex­ec­u­tive an­a­lyst at Au­to­trader.

The deal could re­move one cloud that hangs over Tesla. In­vestors fret­ted about the com­pany’s abil­ity to cope with­out Musk, a charis­matic en­tre­pre­neur whose pen­chant for com­ing up with rev­o­lu­tion­ary ideas has drawn com­par­isons to one of Sil­i­con Val­ley’s most revered vi­sion­ar­ies, Ap­ple co-founder Steve Jobs.

Tesla’s stock plum­meted 14 per­cent on Fri­day after the SEC filed its law­suit, eras­ing more than $7 bil­lion in share­holder wealth. Many an­a­lysts pre­dicted the shares were bound to fall even fur­ther if Musk had been forced to step down. Tesla’s stock has dropped 30 per­cent since Aug 7, clos­ing on Fri­day at $264.77.

The steep down­turn in Tesla’s mar­ket value may have in­flu­enced Musk’s ap­par­ent change of heart to ne­go­ti­ate a set­tle­ment. Musk had re­jected a sim­i­lar set­tle- ment of­fer be­fore the SEC sued Thurs­day, main­tain­ing he had done noth­ing wrong when he posted a tweet declar­ing that he had se­cured the fi­nanc­ing to lead a buy­out of Tesla.

The SEC al­leged Musk wasn’t close to lock­ing up the es­ti­mated $25 bil­lion to $50 bil­lion needed to pull off the buy­out.

Musk and Tesla reached their set­tle­ment with­out ad­mit­ting to or deny­ing the SEC’s al­le­ga­tions.

The res­o­lu­tion “is in the best in­ter­ests of our mar­kets and our in­vestors, in­clud­ing the share­hold­ers of Tesla”, SEC Chair­man Jay Clay­ton said in a state­ment.

A Tesla spokes­woman said the com­pany and Musk had no com­ment on Satur­day.

Be­sides pay­ing a fine and strip­ping Musk of his chair­man’s ti­tle, Tesla also must ap­point two more di­rec­tors who have no ties to the com­pany or its man­age­ment. Musk will be al­lowed to re­main on the board.

The com­pany also must clamp down on Musk’s com­mu­ni­ca­tions with in­vestors, a re­quire­ment that might make its col­or­ful CEO’s Twit­ter posts slightly less in­ter­est­ing.

“Maybe this will make Musk stop act­ing so crazy and fly right,” said Carl To­bias, a law pro­fes­sor at the Univer­sity of Rich­mond.

MO­HAMMED SALEM / REUTERS

Rel­a­tives of a 14-year-old boy killed by Is­raeli troops mourn dur­ing his funeral in Gaza on Satur­day.

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