MUSK TO RESIGN AS TESLA CHAIRMAN, STAY AS CEO
Party to pay US$20m to regulators, billionaire remains as CEO
TESLA and Elon Musk have agreed to pay US$20 million (RM82.8 million) each to financial regulators and the billionaire will step down as the company’s chairman, but remain as chief executive officer (CEO), under a settlement that caps a tumultuous two months for the carmaker.
The securities fraud agreement, announced by the Securities and Exchange Commission (SEC) on Saturday, will come as a relief to investors, who had worried that a lengthy legal fight would only further hurt the lossmaking electric car company.
The SEC said Musk, 47, misled investors with tweets on August 7 in which he said he was considering taking Tesla private and had secured funding.
The regulator had alleged in a suit on Thursday the tweets had no basis in fact, and said the market chaos that ensued hurt investors.
The SEC charges against Musk on Friday shaved about US$7 billion off high-flying Tesla, knocking its market value to US$45.2 billion on Friday, below General Motors Co’s US$47.5 billion.
In the settlement, the agency pulled back from its demand that Musk, who was synonymous with the Tesla brand, be barred from running Tesla, a sanction that many investors said would be disastrous.
“I think this is the best possible outcome for everyone involved” said Ivan Feinseth of Tigress Financial Partners, who rates Tesla “neutral”, who added the SEC’s penalty was only a slap on the wrist for Musk. “The fact that he can remain CEO is very important for the company.”
Neither Musk nor Tesla admitted or denied the SEC’s findings as part of the settlement.
Musk is now required to step down as chairman of Tesla within 45 days, and he is not permitted to be re-elected to the post for three years.
Tesla is required to appoint two new independent directors to its board, a move Feinseth should strengthen the company.