Tesla, SEC reach agreement
FRAUD CHARGE: MUSK CHARGED WITH MISLEADING INVESTORS THROUGH AN UNTRUE TWEET
Neither party has admitted or denied the findings of the agency.
Tesla Inc and South African-born Elon Musk have agreed to pay $20 million each to financial regulators, plus the billionaire will step down as the company’s chairman but remain as chief executive under a settlement that caps a tumultuous two months for the carmaker.
The securities fraud agreement, disclosed by the US Securities and Exchange Commission (SEC) on Saturday, will come as a relief to investors, who worried that a lengthy legal fight would only further hurt the loss-making electric car company.
The SEC on Thursday charged Musk, 47, with misleading investors with tweets on August 7 that said he was considering taking Tesla private at $420 a share and had secured funding. The tweets had no basis in fact and the ensuing market chaos hurt investors.
Investors and corporate governance experts said the agreement could strengthen Tesla, which has been bruised by Musk’s recent behaviour – like smoking marijuana and wielding a sword on a webcast, and attacking a British rescue diver via Twitter.
The settlement should place more oversight on Musk while not taking the “devastating” measure of forcing him out, said Steven Heim, a director at Boston Common Asset Management which owns shares in Tesla battery maker Panasonic Corp.
Tesla must appoint an independent chairman, two independent directors and a board committee to set controls over Musk’s communications under the proposed agreement.
“The prompt resolution of this matter on the agreed terms is in the best interests of markets and investors, including the shareholders of Tesla,” SEC chairman Jay Clayton said in a statement.
Thursday’s charges shaved about $7 billion (R99 billion) off Tesla, knocking its market value to $45.2 billion on Friday.
The agency pulled back from its demand that Musk, who is synonymous with the Tesla brand, be barred from running Tesla, a sanction many investors said would be disastrous.
Neither Musk nor Tesla admitted or denied the SEC’s findings as part of the settlement, which still must be approved by a court. Tesla and Musk did not immediately respond to requests for comment.
The entrepreneur is required to step down as chairman within 45 days and is not permitted to be re-elected for three years.
The SEC charged Tesla with failing to have required disclosure controls and procedures for Musk’s tweets. It said the company had no way to determine if his tweets contained information that must be disclosed in corporate filings or if they contained complete and accurate information.
The settlement tasks the board with the challenge of finding an independent chairman able to work closely with the sometimes unpredictable chief executive.
It was not immediately clear who would be appointed to the role. – Reuters