Elon Musk to Resign as Chair of Tesla Board but Remain CEO

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"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", Steven Peikin, Co-Director of the SEC's Enforcement Division, said in the SEC statement.

Initially, Musk was ready to accept SEC's proposed settlement that stipulated he would step down as chairman for two years and pay between $5-10 million as a fine.

The settlement comes just two days after the SEC sued Musk for fraud and sought to block the way of entrepreneur from running affairs of Tesla or any other publicly-traded company.

Tesla shares sank last week after the SEC accused Mr Musk of securities fraud, opening up the prospect of a long-drawn out fight that could have seen Tesla lose its leader, undermine its ability to raise capital and cripple operations.

Hitting production and delivery targets has become increasingly important for Tesla's relationship with Wall Street investors after the auto maker struggled to increase production to meet demand of its new Model 3 electric vehicle.

Loup Ventures Managing Partner Gene Munster noted that the SEC settlement is the best outcome possible from Elon Musk's "funding secured" fiasco.

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On Saturday, the SEC said that it also charged Tesla the same day "with failing to have required disclosure controls and procedures relating to Musk's tweets, a charge that Tesla has agreed to settle".

Shares of the company were up 14.9 percent at $304.19.

Lawyers said over the weekend that the settlement and size of the fine may give more ammunition to short-sellers pursuing separate cases against Musk for manipulating the company's shares as well as to a probe by the Justice Department. The shares closed at $307.52 Thursday before the SEC announced its enforcement action over the tweets, in which Musk said he had "funding secured" to take the company private at $420 a share. Musk said August 7 in a company blog post that he was considering taking Tesla private at $420 per share, representing a 20% premium over the stock price following the company's second-quarter earnings release.

"We are very close to achieving profitability and proving the naysayers wrong, but, to be certain, we must execute really well tomorrow (Sunday)", Musk wrote in the email to staff.

It was precisely his Twitter postings about his idea to remove Tesla from the stock market, which led him now to resign from the post of chairman of Tesla's board of directors.

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