Yahoo Autos Tesla’s Elon Musk Charged with Securities Fraud, Could Lose CEO Job
UPDATE, 9/29/18, 6:00 p.m.: Elon Musk has agreed to step aside as Tesla board chairman in a settlement with the U.S. Securities and Exchange Commission. Tesla will also pay a $20 million fine and has agreed with the SEC to add two independent board members. Musk will not be able to return to the chairmanship for three years, the Washington Post reported on Saturday.
Elon Musk could be ousted from the leadership of Tesla after rejecting a settlement proposal from federal prosecutors this week addressing a tweet he made about his intention to take the company private.
Instead, as the Wall Street Journal reports, Musk on Thursday refused to sign the undisclosed settlement with the U.S. Securities and Exchange Commission (SEC), and the federal agency filed civil fraud charges against him the same day. At issue is Musk's August 7 tweet that read: "Am considering taking Tesla private at $420. Funding secured." Also involved in the charges are subsequent tweets about having secured funding for such a deal. The SEC alleges Musk made "false and misleading statements" to imply the deal needed only a shareholder vote, despite the fact that the CEO knew the transaction was "uncertain" and that he had "not discussed specific deal terms with any potential financing partners."
"An officer's celebrity status or reputation as a technological innovator does not give license to take those responsibilities lightly," said Steven Peikin, an SEC enforcement director, in a statement.
If found guilty, the SEC would order Musk to pay fines, step down as CEO, and bar him from acting as an officer or director of any publicly traded company registered with the SEC. Musk is prepared to fight the charges and released a statement.
"This unjustified action by the SEC leaves me deeply saddened and disappointed," he said. "I have always taken action in the best interests of truth, transparency, and investors. Integrity is the most important value in my life, and the facts will show I never compromised this in any way."
While Musk also detailed his privatization plan on the company blog on August 7, writing that he wanted Tesla to be "free from as much distraction and short-term thinking as possible," the SEC called him "reckless" for claiming a deal was imminent and for causing "significant confusion and disruption in the market for Tesla's stock."
Musk had been in talks with an investment fund since January 2017 to potentially establish new funding and a manufacturing plant in the Middle East, the SEC complaint said. The complaint alleges that during the most recent meeting with the fund, on July 31, Musk never discussed "even the most fundamental terms of a proposed going-private transaction," including the 20 percent stock price premium he promised to current Tesla shareholders if they decided to sell. The $420 stock price, according to the SEC, was a rounded number from $419 that Musk chose due to the "number's significance in marijuana culture" in part because he thought his girlfriend "would find it funny." Musk is no stranger to controversy, but his recent ramblings-smoking a joint during a webcasted radio show, sleeping on the factory floor, and having rapper Azealia Banks at his home-have unnerved Tesla investors.
Tesla and its board of directors released a joint statement in response to the SEC charges, saying: "Tesla and the board of directors are fully confident in Elon, his integrity, and his leadership of the company, which has resulted in the most successful U.S. auto company in over a century. Our focus remains on the continued ramp [up] of Model 3 production and delivering for our customers, shareholders, and employees."
Tesla shares sank after Musk's original tweet and have not recovered, from $379.57 on August 7 to $307.52 as of close on September 27. The roller-coaster ride of Tesla's highly volatile share prices, however, is unchanged from how it usually performs. What may potentially be different, now that the SEC has filed charges, is Tesla without Elon Musk.
('You Might Also Like',)
