Tesla’s Musk settles with SEC
Founder to pay $20 million fine and resign as chairman
Tesla chief executive Elon Musk agreed on Saturday to step down as chairman of the electric car maker he founded, an unexpected resolution to a lawsuit filed by the Securities and Exchange Commission 48 hours earlier that threatened to throw Tesla into unprecedented chaos.
The SEC sued Musk on Thursday for allegedly lying to investors when he tweeted last month that he had “funding secured” to take Tesla private. It sought to ban the impulsive billionaire from serving as chief executive of any public company.
As part of the settlement, Musk will pay a $20 million fine. Tesla will separately pay another $20 million, add two new independent directors to its board, and monitor more closely Musk’s public communications — the source of many of the scandals that have roiled the ambitious but unprofitable company this year.
The conditions of the agreement “are specifically designed to address the misconduct at issue by strengthening Tesla’s corporate governance and oversight in order to protect investors,” Stephanie Avakian, co-director of the SEC’s Enforcement Division, said in a statement.
Musk and Tesla were not required to admit to any wrongdoing as part of the settlement. Tesla declined to comment on the settlement.
Reacting to the lawsuit earlier in the week, Musk said the SEC’s “unjustified action” left him “deeply saddened and disappointed.” “Integrity is the most important value in my life and the facts will show I never compromised this in any way,” he added.
The deal announced Saturday was all the more surprising because the SEC had offered similar terms last week after conducting an investigation that was unusually quick. Musk abruptly rejected that initial settlement earlier this week, people familiar with the matter said, prompting the SEC to file civil suit Thursday afternoon. Musk, meanwhile, hired several high-powered attorneys to prepare a defense, appearing to gear up for the fight of his career.
But Tesla’s stock tumbled more than 14 percent following the SEC lawsuit, reflecting the degree of risk associated with Musk’s leadership of the car maker in jeopardy. It is unclear why Musk, who rarely backs down from a fight, changed his mind.
The company’s attorneys, Bradley Bondi of Cahill Gordon & Reindel, and Musk’s attorney, Steven Farina of Williams & Connolly, held several late-night calls with the SEC, attempting to resolve the matter, according to a person close to the company.