Musk out as chairman of Tesla but will remain CEO

SEC settles charges with billionaire over bid to take company private and imposes $40m in fines

ELON MUSK, the billionaire technology entrepreneur, will step down as chairman of the electric car company Tesla for three years and pay a £15m fine to settle fraud charges.

The Securities and Exchange Commission (SEC), the US financial markets regulator, announced the deal with the carmaker’s chief executive last night.

It comes just two days after the SEC sued Musk for fraud and sought to have him barred from running Tesla.

In August, Musk falsely claimed on Twitter that he had secured funds for a multi-billion dollar buyout of Tesla, leading its share price to soar and creating huge losses for “short-selling” investors who had bet against the firm.

“Am considering taking Tesla private at $420 [per share]. Funding secured,” Musk wrote on Twitter, after a meeting with Saudi investors who had expressed an interest in the company.

It soon emerged that such a deal was far from guaranteed, and the SEC launched an investigation into the tweet. Last week, the SEC revealed it was pursuing fraud charges, leading Tesla’s share price to plummet.

Musk, 47, has become notorious for his erratic behaviour in recent months, including smoking marijuana on air while appearing on a podcast, and accusing a British cave expert involved in the rescue of a Thai football team of being a paedophile.

As part of the settlement announced last night, Musk will remain Tesla’s chief executive but will have to step down as chairman of the company’s board of directors within 45 days.

The company will also appoint two new independent board directors, to try to improve oversight of how the company is run and keep a check on Musk’s control of the business.

Both Musk and Tesla have also agreed to pay fines of $20million (£15m) each, the proceeds of which will be dis- tributed to investors who suffered financially after Musk’s tweet.

Musk, who has become known for tweeting sensitive financial information without having them approved by the company, has also agreed to have the company’s board oversee his communications with investors.

“The resolution is intended to prevent further market disruption and harm to Tesla’s shareholders,” said Steven Peikin, co-director of the SEC’s Enforcement Division.

Despite the heavy fines, the settlement will come as a relief to Tesla, avoiding the possibility he could be banned from running it altogether.

The news of the SEC’s fraud charges on Thursday had sent the value of Tesla’s shares falling by 14 per cent on Friday, knocking billions off the company’s value, as investors grappled with the prospect of Musk leaving the car-

‘In August, Musk falsely claimed on Twitter that he had secured funds for a multi-billion dollar buyout’

maker. The company, a pioneer in electric vehicles, has struggled as it attempts to make enough of its massmarket Model 3 vehicle to match customers’ demand, and remains heavily lossmaking.

Musk had sought to engineer a buyout that would take the company off the public markets, which he believed would secure its future and avoid the distractions of its erratic share price.

The entrepreneur is Tesla’s largest shareholder with a net worth of more than $20 billion, so he will not struggle to pay the fine. Musk had resisted being forced to relinquish his role as Tesla’s chairman, a position that, combined with being its chief executive and largest shareholder, means he exercises an unusual amount of control. He had reportedly rejected an earlier deal with the SEC that would have forced him to step down as chairman, and had successfully fought off an attempt from some shareholders to appoint a separate chairman earlier this year.

Musk and Tesla did not comment.