Musk fined, quits as chair of Tesla board
● Entrepreneur stays on as CEO after fraud charges
Elon Musk has reached a deal over fraud charges that will see him step down as electric car maker Tesla’s board chair and pay a $20m (R283m) fine but stay on as CEO, US securities regulators have said.
The agreement eases pressure on Tesla’s embattled CEO, who faced potentially being barred from serving as an officer or board member of a publicly traded company as a result of the charges, which stemmed from a tweet by Musk about taking the company private.
“The settlements, which are subject to court approval, will result in comprehensive corporate governance and other reforms at Tesla – including Musk’s removal as chairman of the Tesla board – and the payment by Musk and Tesla of financial penalties” of $20m each, the Securities and Exchange Commission said at the weekend.
The SEC had charged Musk with securities fraud, alleging that he misled investors when he tweeted on August 7 that he had funding secured to privatise the electric vehicle-maker at $420 (R5,941) a share.
That caused a brief spike in Tesla’s share price, leading short-sellers, who have been betting on the stock crashing for years, to lose millions.
The SEC said Musk’s statements on Twitter were “false and misleading” and that he had never discussed the plans with company officials or potential funders.
Musk said he had later decided against the plan.
“When companies and corporate insiders make statements, they must act responsibly,” SEC chair Jay Clayton said.
Under the agreement Musk will be ineligible to serve as board chair for a period of three years and will be replaced by an “independent chairman”, the SEC said.
Two “independent directors” will also be appointed by Tesla, and the company will set up a new committee of independent directors and “put in place additional controls and procedures to oversee Musk’s communications”, the SEC said.
The $40m (R566m) in financial penalties “will be distributed to harmed investors under a court-approved process”.
“The total package of remedies and relief announced is specifically designed to address the misconduct at issue by strengthening Tesla’s corporate governance and oversight in order to protect investors,” the SEC’s co-director of enforcement Stephanie Avakian said.
“The resolution is intended to prevent further market disruption and harm to Tesla’s shareholders,” SEC co-director of enforcement Steven Peikin said.
Tesla’s shares plummeted around 14% on Friday over concerns about the company’s future after the announcement of the fraud charges against Musk, which were a fresh blow to the mercurial Silicon Valley entrepreneur and his company.
Musk has baffled investors with seemingly erratic media appearances, including one where he appeared to smoke dagga, and a public battle with a rescuer who helped save a group of boys trapped in a cave in Thailand, whom he termed a “paedo guy”.
Tesla is seeking to ramp up production of its mass-market Model 3. It had struggled to overcome production bottlenecks but now faces other logistical issues, Musk says.