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Elon Musk forced to stepdown as chairman of Tesla after reaching deal with SEC

South African entrepreneur Elon Musk, who is the founder and CEO of electric car manufacturing behemoth Tesla, has been forced to stepdown as chairman of the company - and ordered to pay $20 million after reaching an agreement with the SEC.

The Securities and Exchange Commission settled charges with Tesla's CEO following his aborted bid to take the company private. He will remain on as Tesla's CEO, but he has relinquished his title of chairman and was slapped with the hefty fine. In addition to the $20 million Musk has to pay, the company also has to pay $20 million.

The SEC's enforcement action brings to a close a saga which started in August when Musk announced via his Twitter account that he had secured enough funding for a massive private buyout of Tesla. However, the SEC immediately took issue with the announcement and claimed that by doing so it had issued false and misleading and ultimately had failed to properly notify regulators of material company events.

"This matter reaffirms an important principle embodied in our disclosure-based federal securities laws," SEC chairman Jay Clayton said in a statement.

"Specifically, when companies and corporate insiders make statements, they must act responsibly, including endeavoring to ensure the statements are not false or misleading and do not omit information a reasonable investor would consider important in making an investment decision," Clayton added.

As part of the settlement Tesla will also be expected to appoint two new independent directors to the board, and institute sweeping governance changes.

"Musk tweeted on August 7, 2018 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," regulators said on Saturday.

However, it has been suggested that 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," they added.

On the day Musk made the surprise announcement, Tesla's stock surged by over six percent - catching off guard the bearish class of investors with whom the billionaire has crossed swords in the past.