Musk forced to step down as Tesla Chairman following investigation
01 October 2018
1 October 2018
Elon Musk has stepped down as chairman of Tesla, with both he and the manufacturer agreeing to pay $20 million (€17.3 million) each in a deal with the Securities and Exchange Commission in the US.
The move comes following an investigation into Musk’s tweets in August suggesting that he had raised funds to take the company into private ownership. Weeks later, he announced that he had abandoned the plan and the company would remain on the stock exchange.
The SEC found that at no time did Musk have any investors set up and ready to finance the move, contrary to what he had said on Twitter. The market chaos that ensued following his ′announcement’ hurt those who had already bought shares and invested in the electric vehicle company.
′As a result of the settlement, Elon Musk will no longer be Chairman of Tesla, Tesla’s board will adopt important reforms — including an obligation to oversee Musk’s communications with investors, and both will pay financial penalties,’ Steven Peikin, co-director of the SEC’s Enforcement Division, said in a statement. ′The resolution is intended to prevent further market disruption and harm to Tesla’s shareholders.’
Musk will remain as CEO, although he must step down as chairman within 45 days and cannot be elected to the post for another three-years. The settlement saw the SEC pull back from its demand that Musk is barred from running Tesla, a sanction that many investors said would be disastrous for the company.
The SEC also charged Tesla with failing to have required disclosure controls and procedures for Musk’s tweets. The SEC said the company had no way to determine if his tweets contained information that must be disclosed in corporate filings, or if they contained complete and accurate information.
Neither Musk nor Tesla admitted or denied the SEC’s findings as part of the settlement, which must still be approved by a court.
Tesla must now find a new chairperson who can work closely with the CEO, who has been accused of erratic behaviour in recent weeks, especially with some outbursts on the social media platform which have led to other legal proceedings.
The lawsuit came less than two months after Musk tweeted — falsely, according to the SEC — that he secured funding to take the company private. He arrived at the $420 a share figure by assuming a 20% premium on Tesla shares and rounding up one dollar because ′he had recently learned about the number’s significance in marijuana culture,’ and to impress his girlfriend, according to the SEC’s complaint.
Tesla has been struggling in recent months, slowing production of other models as it falls behind deadlines for its Model 3. The company posted a large Q3 loss in 2017 as a result of production bottlenecks. At the time, it was forced to push deliveries of the new vehicle back by three months. It has only recently managed to ramp up production of the model. Musk has admitted that mistakes led to the delays. Indeed the company was forced to take risks in not prototyping tools before it put the assembly lines into its plants.