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Elon Musk Will Resign As Tesla Chairman, Remain CEO In Settlement With SEC

Elon Musk Will Resign As Tesla Chairman, Remain CEO In Settlement With SEC
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Some have already said it could be "the quickest SEC settlement in history."

What Happened

The Securities and Exchange Commission on Thursday charged Tesla Inc (NASDAQ: TSLA) CEO Elon Musk with securities fraud for his Aug. 7 tweets about taking the company private. On Saturday, the SEC charged Tesla with failing to have required disclosure controls and procedures relating to Musk’s tweets.

The SEC said Saturday Musk and Tesla have agreed to settle these charges against them "without admitting or denying the SEC’s allegations." Among the settlement's requirements:

  • Musk will step down as Tesla’s chairman and will be ineligible to be re-elected chairman for three years;
  • Tesla will appoint a total of two new independent directors to its board;
  • Tesla will establish a new committee of independent directors and put in place additional controls and procedures to oversee Musk’s communications;
  • Musk and Tesla will each pay a separate $20 million penalty. The $40 million in penalties will be distributed to harmed investors under a court-approved process.

Why It's Important

Carl Tobias, a law professor at the University of Richmond School of Law, told CNBC it may be "the quickest SEC settlement in history," and it appeared "it was better for each to compromise and not drag out this dispute. All secured something they wanted and gave up something."

Loup Ventures' Gene Munster said this could be a wake-up call for Musk. He also said this open board creates a big opportunity for the company.

"The open board chairperson role creates an opportunity for Tesla to potentially put someone in place that is capable of influencing Musk and helping Tesla reach sustainability," Munster wrote in note. "Al Gore, currently on Apple’s board, could be an interesting fit given his interest in climate change. Former Boeing CEO Jim McNerney would also be a good option as the former chairman at the company."

Tesla's stock closed Friday at $264.77 per share.

Related Links:

Tesla Analysts Weigh In On Musk's SEC Lawsuit

Vertical Group's Gordon Johnson On Tesla: 'Fraud Is In The DNA'

Photo credit: Public domain.

Posted-In: Elon MuskAnalyst Color News Legal Top Stories SEC Best of Benzinga


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