Tesla CEO Elon Musk. Image: Kathy Hutchins/Shutterstock
A salutary lesson to all executives on how to behave on social media.
As part of its settlement with the Securities and Exchanges Commission (SEC), Tesla co-founder Elon Musk and his company will pay fines of $20m each over Musk’s misleading tweets.
He will remain as CEO but must relinquish the role of chair of the company.
Last week, the SEC said it was suing Musk over the issuance of “false and misleading” statements he made in August and for failing to notify regulators of material company events. In a series of tweets, Musk said he was considering taking Tesla private at a price of $420, a 20pc premium, using the words “funding secured”, which sent Tesla’s share value surging.
Tweet and be damned
Under a deal with the SEC, Musk and Tesla neither admit or deny wrongdoing alleged by the regulators.
With both Musk and Tesla to pay a fine of $20m each, the $40m must be distributed to investors who were harmed by the saga under a court-approved process.
Tesla must also appoint a total of two new independent directors to its board and establish a new committee of independent controls and procedures to oversee Musk’s communications.
“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,” said Stephanie Avakian, co-director of the SEC’s enforcement division.
The crux of the matter is that regulators believe that Musk knew that the potential “funding secured” was uncertain and subject to negotiations, and therefore lacked any adequate basis in fact.
The tweets in August sent Tesla’s stock surging by $15 to $370 per share. At a share price of $420, Tesla’s total stock would have been worth more than $70bn.
Last week, Musk described the charges as an “unjustified action” that left him “deeply saddened and disappointed.”
While many observers would have expected a pugnacious Musk to possibly countersue the SEC, no one could have expected the swiftness of events that saw Musk end up stepping down as chair. It is understood that negotiations between Tesla’s legal team and the SEC opened on Friday (28 September) and were concluded on Saturday.
Tesla CEO Elon Musk. Image: Kathy Hutchins/Shutterstock
