The United State Securities and Exchange Commission (SEC) released a statement on Saturday that CEO Elon Musk and auto-manufacturer Tesla have both agreed to pay USD$20 million as part of a settlement agreement that will also see Musk resign as Chairman of Tesla.
Musk, whose name is interchangeable with that of Tesla, will still remain executive but has been forced to pay such a hefty amount due to allegations over tweets he made on August 7th.
Am considering taking Tesla private at $420. Funding secured.
— Elon Musk (@elonmusk) August 7, 2018
Musk tweeted on August the 7nth that he was planning to privatize the company at USD$420 per share. According to the SEC, Musk chose the figure, a number commonly associated with Marijuana, as a joke to impress his girlfriend, Montreal-based musician Grimes. A couple weeks later, Musk had backed away from his proposed initiative, prompting anger from investors over false information.
The SEC alleged that Musk’s tweets about financing a privatization of Tesla was not based in fact and led to market fallout that misled investors. As per the settlement, Musk has been required to step down from his position as chairman within 45 days and cannot be re-elected to the position for the next 3 years.
Tesla has also been charged by the SEC for their lack of disclosure controls and procedures for Musk’s tweets. According to the SEC’s claims, the company had no way of verifying the accuracy of Musk’s tweets and should have taken the proper precautions to protect its investors.
The settlement did see the SEC back away from some its earlier demands however that Musk be prohibited from running the company, a sanction that would harm the company further and cause further financial damage to Tesla’s investors, the very people the SEC exists to protect.
While both Elon Musk and Tesla have agreed to the terms of the settlement, neither has confirmed nor denied the SEC’s allegations. The SEC claims that the combined USD$40 million in settlement payments will be distributed amongst all those affected by Musk’s ill-advised tweet in a “court approved process“.