A positive outcome for both Elon Musk, Tesla and its ultimate shareholders.
Elon Musk, the CEO of Tesla, agrees to resign as chairman of the company to settle SEC’s fraud case against him. The announcement followed two days after SEC appealed in the tweet of Musk tweet on August 7 about “funding secured” in which he said that he had secured funding to take Tesla private at $420 per share. Musk was disappointed by the fraud charges and called it “unjustified action”.
SEC alleges Musk that the tweet was all a lie, and filed a complaint about the “fraud” in federal court in Southern District of New York. After a few weeks, Tesla posted and announced that the company will stay remain as a public company.
The settlement was accepted by Musk without any words of denying or admitting the allegations. Tesla and Musk will also be paying $20 million separately as part of the settlement. According to SEC, the $40 million penalty money will be distributed to harmed investors. Tesla will appoint two new independent directors to its boars as agreed.
Tesla’s shares suddenly dropped up to 14% on Friday, September 28, after SEC charged Musk of misleading investors and had been down since the August 7 tweet by Elon.
The settlement was still subject to approval. Elon will still remain as CEO of Tesla but will step down as chairman of the board within 45 days and can only seek re-election after 3 years.
The agreement was addressed as “quickest SEC settlement in history”.