Elon Musk settles with SEC, set to resign as Chairman of Tesla

Both Tesla and Elon Musk charged $20M in fines separately

Started from Musk tweet, the issue escalated to a level where the company and himself had to pay $40M in files. Also, that resulted in him having to leave his post as Chairman of the Tesla board within 45 days of the agreement. The agreement was signed on Saturday (September 29, 2018) which also clearly bars him from chairing the board for the next 3-years. In place of him, a new independent chairman is to be appointed.

Musk tweet on August 7, 2018, is where it all started as he said that he could take Tesla private at $420 per share — a substantial premium to its trading price at the time — that funding for the transaction had been secured, and that the only remaining uncertainty was a shareholder vote. The SEC’s complaint alleged that, in truth, Musk knew that the potential transaction was uncertain and subject to numerous contingencies. Musk had not discussed specific deal terms, including price, with any potential financing partners, and his statements about the possible transaction lacked an adequate basis in fact. According to the SEC’s complaint, Musk’s misleading tweets caused Tesla’s stock price to jump by over six percent on August 7 ($341.99 to $379.57) and led to significant market disruption.

The settlement could be seen as a smarter solution to the issue pending for both Elon Musk and Tesla – the company. As it could have easily moved to the following things happenings as the case hearing begins:

Elon Musk being removed as the CEO of the company

He being blocked from taking the position as the high ranking executive of any public company for future

He being blocked from taking the role in the board of directors for may be forever for Tesla and any other companies

The fine amount would have rose significantly

 

Musk is forced to leave as the Chairman of the board. However, he’ll retain his current position as the CEO of the company. The new appointment for the Chairman position would mean better oversight of the company. The company is also set to elect two new independent directors to the board. Tesla is at the stage where they can go huge but are struggling at the moment. A good board of directors helps the company succeed in the future by helping oversee things, help elect executives and give guidance to the company in difficult situations.

Tesla has started a new wave around electric cars with even GM and other big car manufacturing companies coming out with a bold statement of future of car being electric. With all the companies focusing on self-driving car, had there not been Tesla, this movement might not have never started this early. So, the whole system was in jeopardy and could have seen worse result had Musk not agreed to the settlement. This would certainly mean that better things are in store as the company and Elon Musk himself survive to fight for the next day. For the moment, however, Tesla saw another huge dip in their share price as with this announcement, the company saw their stock price fall by 13.9% losing $42.5 per stock.


Personal interpretation with the inclusion of the situation details and updates from SEC.gov press release.

  30 Sep 2018