The SEC had sued Musk for allegedly lying to investors when he made an abrupt tweet last month that he had “funding secured” to take Tesla private. It sought to ban the impulsive billionaire from operating the impulsive billionaire from serving as chief executive of any public company.
Musk is also to pay a $20 million fine to the SEC, according to the settlement. Tesla is also required to pay another $20 million on its own. It is also all set to add two new independent directors to its board, and more closely monitor Musk’s public communications—which have been the source of many of the scandals that have hit the renowned, yet troubled company this year.
Stephanie Avakian, co-director of the SEC’s Enforcement Division, stated that the conditions of the agreement “are specifically designed to address the misconduct at issue by strengthening Tesla’s corporate governance and oversight in order to protect investors.”
Musk and Tesla were not required to admit to any wrongdoing as part of the settlement. Tesla in itself declined to comment on the settlement.
Reacting to the lawsuit earlier in the week, Musk stated the SEC’s “unjustified action” left him “deeply saddened and disappointed.”
“Integrity is the most important value in my life and the facts will show I never compromised this in any way,” he added.
The deal announced Saturday was all the more surprising because the SEC had offered similar terms last week after it conducted an investigation that was unusually quick. Musk had rejected that initial settlement earlier this week, said people familiar with the matter – this had prompted the SEC to file civil suit.
Musk, meanwhile, hired several high-powered attorneys to prepare a defence, appearing to gear up for the fight of his career.
Following the SEC lawsuit, Tesla’s stock tumbled more than 14% It remains unclear why Musk, who rarely backs down from a fight changed his mind.
Stepping down as chairman can be potentially humbling for Musk, 47, who is currently Tesla’s chairman, chief executive and largest shareholder, with a roughly 20% stake in the company. He oversees virtually all of the company’s development, engineering and design.
Musk also has 22 million twitter followers and now will have the company sign off on any written statements, including the social media platform.
Michelle Krebs, executive analyst at Autotrader stated that : “Musk and Tesla got lucky. … Still, a reckless tweet cost a lot of money — the $20 million tweet.”