Elon Musk will give up the role of Tesla Inc. chairman and pay a $20 million penalty to settle fraud charges brought by the US over his claims about taking the company private.<\/p>\n
Musk will get to keep his job as chief executive officer and remain on the company\u2019s board, but must resign as chairman within 45 days and can\u2019t be re-elected to the role for three years as part of the accord reached Saturday with the Securities and Exchange Commission. Tesla will also pay a $20 million fine.<\/p>\n
Neither Tesla nor Musk admitted wrongdoing under the settlement, which was reached two days after the regulator sued the billionaire over his tweeted claims to have had the funding and investor support to buy out stockholders at $420 a share.<\/p>\n
The deal eases uncertainty over Tesla\u2019s future while removing Musk from a key role at the automaker he\u2019s led to become one of the most valuable in the world.<\/p>\n
The SEC\u2019s lawsuit had sought to bar Musk from serving as an officer or director of a public company, a prospect that rattled investors. Tesla shares plummeted 14% on Friday, the biggest drop in almost five years.<\/p>\n
\u201cThis is a good resolution for Tesla stakeholders,\u201d Ben Kallo, an analyst at Robert W. Baird & Co. with the equivalent of a buy rating on the shares, said in an email.<\/p>\n
\u201cI expect the stock to trade materially higher on this and into the quarter where we can focus on the fundamentals.\u201d<\/p>\n
Musk will purchase $20 million worth of the company\u2019s stock in the next trading opportunity, according to a person familiar with his plans. He\u2019s Tesla\u2019s largest shareholder, with a 20 percent stake.<\/p>\n
On the Verge<\/strong><\/p>\n While the 15-year-old company has never earned an annual profit, Tesla\u2019s CEO has vowed it\u2019s the verge of making money and stemming cash burn that\u2019s exceeded more than $1 billion in recent quarters.<\/p>\n He\u2019s made these assurances in large part due to progress Tesla has made in producing more Model 3 sedans \u2014 the first electric vehicle Tesla has tried to mass-manufacture.<\/p>\n The settlement requires that Tesla appoint two new independent directors and establish a committee of independent board members. Tesla had come under criticism for years prior to Musk\u2019s take-private episode for lax governance, though shareholders sided with the board in June by voting against an independent chairman proposal and approving the re-election of three directors.<\/p>\n Steven Peikin, co-director of the SEC\u2019s Enforcement Division said the resolution is intended to prevent further market disruption and harm to Tesla investors.<\/p>\n \u2018Deep Breath\u2019<\/strong><\/p>\n \u201cBoth sides have pulled back, taken a deep breath and realized that in the interest of the company, its shareholders, they need to put this behind them,\u201d said Stephen Crimmins, a former SEC enforcement lawyer who\u2019s now a partner at Murphy & McGonigle.<\/p>\n \u201cShareholders with Tesla will be able to go to sleep tonight knowing the Musk will remain at the helm of the company. At the same time, there will be appropriate restraints in place.\u201d<\/p>\n The SEC filed its lawsuit Thursday, less than two months after Musk tweeted \u2014 falsely, according to the agency \u2014 that he secured funding to take the company private.<\/p>\n He arrived at the $420 a share figure by assuming a 20 percent premium on Tesla shares and rounding up one dollar because \u201che had recently learned about the number\u2019s significance in marijuana culture,\u201d and to impress his girlfriend, according to the SEC\u2019s complaint.<\/p>\n The settlement doesn\u2019t resolve investors\u2019 lawsuits, which were significantly strengthened by the SEC\u2019s complaint.<\/p>\n It revealed facts based on emails, documents and interviews that private lawyers haven\u2019t gained access to yet, giving them a better chance of withstanding Tesla and Musk\u2019s attempts to get the shareholder suits thrown out, legal experts said.<\/p>\n
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