Yahoo Autos Tesla's Elon Musk Settles with SEC, Pays Fine, Steps Down as Chairman
Elon Musk will never again pick up his phone to tweet whatever he fancies about Tesla, now that he reversed course over the weekend to settle fraud charges with the U.S. Securities and Exchange Commission.
The feds had filed a civil suit against Musk after he bailed at the last minute on a settlement offer. In the agreement, announced late in the day on Saturday, September 29, the SEC dropped its toughest sanctions-which would have barred Musk from ever leading or serving on a board of a publicly traded company-in return for Musk's agreement to step down as chairman of the board, an exile that will last for three years. Musk remains CEO of Tesla, but the board must select an independent chairman, appoint two new independent board members, and "place additional controls and procedures to oversee Musk’s communications."
He and Tesla will each pay a $20 million fine, which will be paid out to investors. Although this will hardly affect Musk's billionaire net-worth status, it will put a serious dent in Tesla's side, since the company, founded in 2003, has never yet made an annual profit. Musk is estimated to have a personal fortune of about $20 billion. The South African, from his native country, reported today that Musk lost $1.5 billion of his net worth in one day as the SEC pressed charges and company stock took a dive. The paper estimated that, as of September 30, Musk "has $21.6 billion in the bank."
In a statement, the SEC said: "Tesla had no disclosure controls or procedures in place to determine whether Musk’s tweets contained information required to be disclosed in Tesla’s SEC filings. Nor did it have sufficient processes in place to ensure the information Musk published via his Twitter account was accurate or complete."
In other words, Musk might think naughty things, but if they're related to making outlandish promises on Model 3 production or implying he could take the entire company private with just a few clicks, anything that could suddenly inflate his company's stock that he can't substantiate will be muzzled. He did, as of early Monday morning, tweet that he was listening to O.P.P.'s "Naughty by Nature." The company had no response this morning.
Meanwhile, Tesla is scheduled to issue its quarterly production and delivery report early this week. The automaker has been under close scrutiny over its delays in meeting demand for its Model 3. Musk emailed employees in early September, saying, "We are about to have the most amazing quarter in our history." Forbes magazine reported today that the "consensus estimate" was that Tesla would report more than 53,000 Model 3 deliveries and a total of 79,000 total vehicle deliveries for the quarter, citing Visible Alpha Insights. The publication commented that these results, if borne out by Tesla's announcement, would be "perhaps not as negative" as many Tesla watchers have suggested.
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