Two days after the Securities and Exchange Commission (SEC) sued Elon Musk for securities fraud related to misleading tweets about Tesla, Musk and Tesla have reached an agreement with the SEC.
The settlement allows Musk to stay on as CEO, but requires him to relinquish the role of Chairman of the Board and not seek that post again for three years. In addition, Musk must pay US$20 million in fines and agree to comply with corporate communication processes. Tesla has also agreed to pay US$20 million in fines and to appoint two new outside members to the board.
The settlement represents a substantial compromise on the SEC’s part. The lawsuit had asked for Musk to step down as CEO and it sought to bar him from serving as officer or director of a public company. Musk is the public face of Tesla, so the company (and its stock) would have likely suffered had this outcome been realized. Even if the matter were litigated, some experts have guessed that as much as 30% of Tesla’s value is contingent on Musk being its CEO.
Musk and Tesla agreed to the terms without admitting or denying wrongdoing.
The settlement still must be approved by federal court in Manhattan where it was filed.
Full Content: Bloomberg