Sunday, September 30, 2018

Tesla Recoil

Tesla founder Elon Musk's tweets have finally got him in enough hot water to the point where the Board of Directors has dropkicked him from Chairman down to just CEO.

Elon Musk is finally facing some consequences for his August take-Tesla-private dance. The South African-born billionaire will step down as chairman of the electric car company and pay a $20 million fine as part of a settlement with the Securities and Exchange Commission. The SEC had sued Musk on Thursday after he reportedly turned down an initial deal at the last minute.

As part of the new agreement announced on Saturday settling the SEC’s suit, Musk will resign as Tesla chairman within 45 days, and he won’t be able to be re-elected to the post for three years. Musk and Tesla will each pay a separate $20 million penalty, which will be distributed to harmed investors, and Tesla will appoint two new independent directors to its board. A judge will have to approve the settlement.

Tesla will also hire a lawyer to keep an eye on Musk’s communications as part of the settlement because, the SEC alleges, the company failed “to implement disclosure controls or procedures” related to the CEO’s Twitter activity. In other words, Musk is getting a Twitter babysitter.

This — at least for now — brings to a close a dramatic chapter for Tesla that was ignited when Musk on August 7 tweeted that he was considering taking Tesla private at $420 per share and had already secured funding. It wasn’t clear how much groundwork had actually been laid for such a maneuver, and it’s illegal for companies and executives to give shareholders misleading information about potentially meaningful corporate events. The tweets were at the basis of the SEC’s lawsuit against Musk for securities fraud.

As part of Musk’s settlement, he is not allowed to “admit or deny” whether he did indeed commit securities fraud with his tweets. (He ultimately decided to keep Tesla public.) The New York Times reported earlier in the day Saturday that this specific feature of the agreement had been the initial dealbreaker for Musk. The agency and his lawyers reportedly had this set to go on Thursday, but at the last minute, he backed out.

“The resolution is intended to prevent further market disruption and harm to Tesla’s shareholders,” Steven Peikin, co-director of the SEC’s enforcement division, said in a statement on Saturday.

The Department of Justice is also probing Musk’s privatization tweets. The SEC’s settlement with Musk states that it does not address any potential criminal liability
.

A Tesla spokesperson did not immediately return a request for comment on the settlement.

So, still a pretty good chance that the DOJ will want a piece of Musk, but for now, he stays on board.  How long is anyone's guess though, because he's not the kind of guy who is good at taking no for an answer.

"If you're so rich, how come you're not smart?" comes to mind.

No comments:

Post a Comment