Elon Musk to Remain Tesla CEO after Settling with SEC

October 1, 2018
1148 Views

Last week it was reported that the United States Securities and Exchange Commission had filed a legal case against Elon Musk for controversial tweets he made about Tesla. It appears that legal teams have been busy over the weekend, as now the SEC has announced that they will settle the case with Musk, allowing him to retain his CEO position in exchange for hefty fines.

Elon Musk and Tesla Will Pay a Combined $40 Million in Fines

The SEC found in a month-long investigation that Elon Musk earlier Tweets about taking Tesla private were misleading and not based on truth.

Musk said that he was considering taking the company private with a buyout of shares at $420 each. His biggest mistake and the reason for massive financial penalties was the fact that he told investors that funding was secured.

In the investigation, the SEC found that no funding had been secured. Musk’s Tweets in August caused Tesla stock to increase in value by 7%. Short traders and other investors ultimately lost out as shares sharply declined when it was revealed that Musk’s Tweets were not genuine.

Musk later told investors that he would not take the company private with a buyout, but this wasn’t enough to stop the SEC from getting involved.

Noted in the settlement that was revealed early Monday morning, Musk will pay $20 million in fines, while the company will pay another $20 million. Musk may not use insurance or any other assistance – the fine must come from his personal holdings.

The settlement also removes Elon Musk from his position as Chairman on the Tesla board, however, he will retain his position as CEO.

SEC and Most Observers are Happy with the Outcome

Musk stated last week that he was “saddened and disappointed” by the SEC’s decision to take legal action. Industry analysts and the SEC are more positive about the outcome.

SEC Chairman Jay Clayton said of the settlement that “It is often the case that the interests of ordinary shareholders – who had no involvement in the misconduct – are intertwined with the interests of offending officials and the company. The interests of ordinary investors are at the front of our minds and, in matters involving misconduct, we seek to serve those interests to the extent practicable.”

Law experts have noted that the SEC has in this case punished an act of fraud without decimating the company in question. Ultimately, Tesla gets to continue in business with a relatively small impact in terms of their total finances. The company will get two new board members, and this could ultimately benefit investors.

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