Tech mogul Elon Musk will purchase $20 million dollars worth of Tesla Stock with his own money, after the company was fined a hefty fee for his tweets.
The SEC claimed that Musk had misled investors by tweeting “funding secured” for Tesla to go private. Musk agreed to pay $20 million to settle the federal lawsuit last month.The settlement also forced Musk to step down from his position as chairman of Tesla. However, he remains the CEO.
Am considering taking Tesla private at $420. Funding secured.
— Elon Musk (@elonmusk) August 7, 2018
The settlement was approved by the federal judges this past Monday.
This isn’t the first time Musk had used his own money to purchase stocks in the company. Musk had disclosed in a filing to the SEC that he bought shares for the company, paying $9.9 million for 33,000 shares in April, then a few weeks later he purchased $24.9 million for 72,500 shares in May.
It is not conventional for CEO’s to purchase stock shares in their own companies for open market price. The common tradition according to CNN Business is to “either exercise stock options (for cheap) or receive grants of stock directly from the company (for free).”
Musk will acquire the stock shares directly from Tesla, therefore the money will go straight to the company. Tesla, however, did not comment on whether the shares Musk is purchasing are intended to pay off the fine.
Nonetheless, the amount of money Musk is putting up is equivalent to the amount of money to be payed for the fine, and the purchase he is making will only increase his stake in the tech company by 0.2%. Tesla did not comment any further.
Tesla’s stock has been volatile for a while now. This is mostly due to the constant executive turnovers in the company. A few months ago, yet another Tesla executive, Gilbert Passin, left the company. Both Tesla and Passin did not provide any further information.
Before he left, Passin had been with Tesla for 8 years as the vice president of engineering for the company. Therefore, his resignation was not taken lightly by investors.
“Executive departures at Tesla have concerned investors. Tesla’s director of field performance engineering and senior vice president of engineering recently left the company. The chief accounting officer quit after less than a month on the job.”
Earlier this September, Tesla went through another executive shake-up which caused investors to panic once again.
Tesla’s chief accounting officer resigned in less than a month, while Gaby Toledano, Tesla’s chief people officer did not return after taking a leave of absence.
Doug Field, the company’s senior vice president of engineering had also quit to pursue his career at Apple. Field was a prominent figure at Tesla, and his resignation caused a loss in morale among the team.
John Wilson, head of research and corporate governance at Cornerstone Capital Group, cautioned about the turnover among the executives.
“He’s a visionary … but his job is to be catalyst, the inspiration, not necessarily the person to make it happen day after day after day.”
“His brilliance can’t shine if he doesn’t have that bench of executive strength,” said Wilson.