Tesla CEO Elon Musk Out as Chairman, Required to Pay $20 Million in SEC Settlement
A few days after the Securities and Exchange Commission (SEC) announced that it would be suing Tesla CEO Elon Musk over a tweet that he made on August 7, the government agency, Tesla, and Musk have all reached an agreement.
What's Changing At Tesla
Under the settlement, which will require a court's approval, Musk will have to reprise his role as chairman of Tesla's board within 45 days for three years. An independent chairman will replace Musk and two independent directors will be added Tesla's board, as well. Both Musk and Tesla will have to pay separate fines of $20 million each. Musk will be able to remain Tesla's CEO.
In addition to these changes, the agreement also requires Tesla to set up a board committee to oversee Musk's communications with investors, especially the ones the CEO continues to make via Twitter.
"The total package of remedies and relief announced today are specifically designed to address the misconduct at issue by strengthening Tesla's corporate governance and oversight in order to protect investors," stated Stephanie Avakian, Co-Director of the SEC's Enforcement Division in a statement.
In choosing to settle, Musk doesn't have to admit or deny any wrongdoing and Tesla won't be charged with fraud.
"The resolution is intended to prevent further market disruption and harm to Tesla's shareholders," said Steven Peikin, Co-Director of the SEC's Enforcement Division.
How It All Started
All of this hoopla started when Musk sent out a tweet on August 7 claiming that Tesla has secured the necessary funding to take Tesla private at $420. "Am considering taking Tesla private at $420," read the tweet. "Funding secured."
The tweet took everyone by surprise and spurred Tesla's stock to rise to $370, up by roughly 5 percent. Since then, the stock has taken a dip, hitting a low of $263 on Sept. 7. After Tesla and Musk's deal with the SEC, the company's stock has soared, rising by almost 16 percent to its current mark of hovering around $306.
While investors are probably happy to see that Musk will continue to act as Tesla's CEO, the automaker is getting ready to reveal its Q3 deliveries in the near future, which may have had something to do with the drastic increase in stock. To reach its lofty Model 3 delivery goals, Tesla reportedly decided to hand deliver vehicles to customers under a new service called "Tesla Direct." The service was free for Tesla customers toward the end of September and will probably be extended to ensure that Model 3 customers aren't waiting too long to get their hands on a Model 3.
Photo via: CNBC Television
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