By his mouth, or better, by his tweets died the king fish. Elon Musk has agreed to step down from the Chairman position at Tesla as part of the settlement agreement that ends the fraud charge brought by the SEC (Securities exchange Commission) against him last week.
According to the SEC’s complaint against him, 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.
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, and led to significant market disruption.
The settlements, which are subject to court approval, will result in comprehensive corporate governance and other reforms at Tesla, including Musk’s removal as Chairman of the Tesla board and the payment by Musk and Tesla of financial penalties.
“As a result of the settlement, Elon Musk will no longer be Chairman of Tesla, Tesla’s board will adopt important reforms —including an obligation to oversee Musk’s communications with investors—and both will pay financial penalties,” added Steven Peikin, Co-Director of the SEC’s Enforcement Division. “The resolution is intended to prevent further market disruption and harm to Tesla’s shareholders.”
The terms of the settlements agreement
Musk and Tesla have agreed to settle the charges against them without admitting or denying the SEC’s allegations, under the following terms:
a) Musk will step down as Tesla’s Chairman and be replaced by an independent Chairman. Musk will be ineligible to be re-elected Chairman for three years.
b) Tesla will appoint a total of two new independent directors to its board.
c) Tesla will establish a new committee of independent directors and put in place additional controls and procedures to oversee Musk’s communications.
d) Musk and Tesla will each pay a separate $20 million penalty. The $40 million in penalties will be distributed to harmed investors under a court-approved process.
Image over the headline.- Tesla, now ex-Chairman, Elon Musk at Tesla Grand Opening in Menlo Park. Tesla.(CC) Brian Solis, www.briansolis.com and bub.blicio.us.
Related external links:
Elon Musk’s tweet explaining that Tesla was to keep on as a public company
Elon Musk’s tweet on Tesla going private (1st tweet)
Elon Musk’s tweet on Tesla going private (2nd tweet)