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https://www.thestar.com/news/world/...ion-fine-and-resigning-as-board-chairman.html
Tesla’s Elon Musk settles with SEC, paying $20 million fine and resigning as board chair
By Michael LiedtkeThe Associated Press
Sat., Sept. 29, 2018
SAN FRANCISCO—Tesla and its CEO Elon Musk have agreed to pay a total of $40 million (U.S.) and make a series of concessions to settle a government lawsuit alleging Musk duped investors with misleading statements about a proposed buyout of the company.
The settlement with the Securities and Exchange Commission allows Musk to remain CEO of the electric car company but requires him to relinquish his role as chairman for at least three years.
Under the settlement, Elon Musk will resign as chairman of the automaker within 45 days and be barred from that position for three years. (Kiichiro Sato / Associated Press)
Tesla must hire an independent chairman to oversee the company, something that should please a number of shareholders who have criticized Tesla’s board for being too beholden to Musk.
The deal was announced Saturday, just two days after SEC filed its case seeking to oust Musk as CEO.
Musk, who has an estimated $20 billion fortune, and Tesla, a company that ended June with $2.2 billion in cash, each are paying $20 million to resolve the case, which stemmed from a tweet Musk sent on Aug. 7 indicating he had the financing in place to take Tesla private at a price of $420 per share.
“A reckless tweet cost a lot of money — the $20-million tweet,” said Michelle Krebs, executive analyst at Autotrader.
The deal could remove one cloud that hangs over Tesla. Investors fretted about the company’s ability to cope without Musk, a charismatic entrepreneur whose penchant for coming up with revolutionary ideas has drawn comparisons to one of Silicon Valley’s most revered visionaries, Apple co-founder Steve Jobs.
Tesla’s stock plummeted 14 per cent Friday after the SEC filed its lawsuit, erasing more than $7 billion in shareholder wealth. Many analysts predicted the shares were bound to fall even further if Musk had been forced to step down. Tesla’s stock has dropped 30 per cent since Aug. 7, closing Friday at $264.77.
The steep downturn in Tesla’s market value may have influenced Musk to have an apparent change of heart and negotiate a settlement. Musk had rejected a similar settlement offer before the SEC sued Thursday, maintaining he had done nothing wrong when he posted a tweet declaring that he had secured the financing to lead a buyout of Tesla.
The SEC alleged Musk wasn’t close to locking up the estimated $25 billion to $50 billion needed to pull off the buyout.
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Musk and Tesla reached their settlement without admitting to or denying the SEC’s allegations.
The resolution “is in the best interests of our markets and our investors, including the shareholders of Tesla,” SEC Chairman Jay Clayton said in a statement.
A Tesla spokeswoman said the company and Musk had no comment Saturday.
Besides paying a fine and stripping Musk of his chairman’s title, Tesla also must appoint two more directors who have no ties to the company or its management. Musk will be allowed to remain on the board.
The company also must clamp down on Musk’s communications with investors, a requirement that might make its colourful CEO’s Twitter posts slightly less interesting.
“Considering the drastic punishment the SEC had announced, Musk and Tesla got lucky,” said Krebs, the Autotrader analyst. “Musk at least remains at the helm of the company, and adding a couple of board members is a good thing.”
The SEC also got what it wanted by bringing the combative Musk down a notch and taking steps to tone down his off-the-cuff remarks while forcing Tesla to expand its board to counterbalance its CEO’s power, said Carl Tobias, a law professor at the University of Richmond. Besides being CEO, Musk owns a roughly 20 per cent stake in Tesla.
“Maybe this will make Musk stop acting so crazy and fly right,” Tobias said.
Besides tweeting about a deal that the SEC alleged he didn’t have money to pay for, Musk had been engaging in other erratic behaviour that had been raising questions about whether he should remain CEO.
Musk had raised hackles by ridiculing stock market analysts for posing fairly standard questions about Tesla’s shaky finances, and calling a diver who helped rescue 12 boys on a Thai soccer team from a flooded cave a pedophile, triggering a defamation lawsuit. He was also recently caught on a widely circulated video apparently smoking marijuana, a legal drug in Tesla’s home state of California.
The erratic behaviour has convinced more analysts that Tesla needs to find a replacement for Musk, but the SEC settlement will allow the company to do so on its own timetable, if it decides to hire a new leader.
Tesla is also under mounting pressure to overcome its past manufacturing problems and produce enough vehicles to become consistently profitable after years of huge losses.
A gauge of the company’s progress should come within the next few days when Tesla is expected to release its vehicle production numbers for the July-September period.
Musk has pledged Tesla would manufacture an average of 7,000 vehicles per week, enough to turn a profit.
Tesla needs to turn the financial corner because it has $1.3 billion in debt coming due during the next six months. If it keeps burning through its cash, Tesla will likely have to raise more money to pay its bills — something that analysts say will be easier to do without any lingering doubt who will be running the company.
Read more:
SEC sues Tesla, alleging it misled investors; seeks to bar Elon Musk from running a public company
Elon Musk says he may take Tesla private and shares soar
Public bravado, private doubts: How Elon Musk’s Tesla plan unravelled
https://www.cbc.ca/news/business/elon-musk-settlement-securities-fraud-charges-tesla-1.4844353
Tesla, CEO Elon Musk settle SEC fraud case for $40M
Thomson Reuters · Posted: Sep 29, 2018 5:50 PM ET | Last Updated: 8 hours ago
U.S. securities regulators filed a complaint against Tesla CEO Elon Musk alleging that he made false and misleading statements about plans to take the company private in August. (Chris Carlson/Associated Press)
Tesla and Elon Musk have agreed to pay $20 million US each to financial regulators and the billionaire will step down as the company's chairman but remain as chief executive, under a settlement that caps a tumultuous two months for the car-maker.
The securities fraud agreement, announced by the Securities and Exchange Commission (SEC) on Saturday, will come as a relief to investors, who had worried that a lengthy legal fight would only further hurt the loss-making electric car company.
The SEC said Musk, 47, misled investors with tweets on Aug. 7 in which he said he was considering taking Tesla private and had secured funding.
The regulator had alleged in a lawsuit on Thursday that the tweets had no basis in fact, and said the market chaos that ensued hurt investors.
The SEC charges against Musk on Friday shaved about $7 billion US off high-flying Tesla, knocking its market value to $45.2 billion US on Friday, below General Motors Co's $47.5 billion US.
In the settlement, the agency pulled back from its demand that Musk, who is synonymous with the Tesla brand, be barred from running Tesla, a sanction that many investors said would be disastrous.
U.S. Securities and Exchange Commission officials are seen at a news conference in Washington on Thursday. The SEC charges against Musk on Friday shaved about $7 billion US off high-flying Tesla, knocking its market value to $45.2 billion US on Friday, below General Motors Co's $47.5 billion US. (Zach Gibson/Getty Images)
"I think this is the best possible outcome for everyone involved," said Ivan Feinseth of Tigress Financial Partners, who rates Tesla "neutral," who added the SEC's penalty was only a slap on the wrist for Musk.
"The fact that he can remain CEO is very important for the company."
Neither Musk nor Tesla admitted or denied the SEC's findings as part of the settlement. Tesla and Musk did not immediately respond to requests for comment.
Agreement could strengthen Tesla
Investors and corporate governance experts said on Saturday that the agreement could strengthen Tesla, which has been bruised by Musk's recent volatile behavior. He was filmed smoking marijuana and wielding a sword on a webcast this month just hours before Tesla said its recently-appointed accounting chief would leave.
The entrepreneur had been directly involved in almost every detail of Tesla's product design and technology strategy, and drove the company's employees to extraordinary achievements - much as another Silicon Valley chief executive, Steve Jobs, did at Apple Inc.
Musk is now required to step down as chairman of Tesla within 45 days, and he is not permitted to be re-elected to the post for three years. Tesla is required to appoint two new independent directors to its board, a move Feinseth should strengthen the company.
The SEC charged Tesla with failing to have required disclosure controls and procedures for Musk's tweets. The SEC said the company had no way to determine if his tweets contained information that must be disclosed in corporate filings, or if they contained complete and accurate information.
Musk walked away at the last minute from an earlier settlement with the SEC that would have required him to give up key leadership roles at the company for two years and pay a nominal fine, according to media reports on Friday.
Tesla has been pushing hard to meet production targets for its electric cars. (Stephen Lam/Reuters)
Investors said on Friday that it has been a big mistake for Musk to turn down that settlement, especially at a time when the company has been pushing hard to meet production targets.
The settlement tasks the Tesla board, which many critics have accused of failing to rein in Musk, with the tricky challenge of finding an independent chairman who is able to work closely with the often emotional and unpredictable chief executive.
Musk, who has often turned to Twitter to promote Tesla and confront critics, said on Thursday that the SEC's actions were unjustified. Tesla shares jumped after his Aug. 7 tweets, a blow to short-sellers betting on the stock's decline.
As CEO, Musk had gained legions of fans for his bold approach to business and technology. He used his Twitter account to promote the achievements of Tesla, his rocket launch company SpaceX, and other projects such as his tunnel venture, the Boring Co, to his nearly 23 million followers.
CBC's Journalistic Standards and Practices
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Tesla’s Elon Musk settles with SEC, paying $20 million fine and resigning as board chair
By Michael LiedtkeThe Associated Press
Sat., Sept. 29, 2018
SAN FRANCISCO—Tesla and its CEO Elon Musk have agreed to pay a total of $40 million (U.S.) and make a series of concessions to settle a government lawsuit alleging Musk duped investors with misleading statements about a proposed buyout of the company.
The settlement with the Securities and Exchange Commission allows Musk to remain CEO of the electric car company but requires him to relinquish his role as chairman for at least three years.
Under the settlement, Elon Musk will resign as chairman of the automaker within 45 days and be barred from that position for three years. (Kiichiro Sato / Associated Press)
Tesla must hire an independent chairman to oversee the company, something that should please a number of shareholders who have criticized Tesla’s board for being too beholden to Musk.
The deal was announced Saturday, just two days after SEC filed its case seeking to oust Musk as CEO.
Musk, who has an estimated $20 billion fortune, and Tesla, a company that ended June with $2.2 billion in cash, each are paying $20 million to resolve the case, which stemmed from a tweet Musk sent on Aug. 7 indicating he had the financing in place to take Tesla private at a price of $420 per share.
“A reckless tweet cost a lot of money — the $20-million tweet,” said Michelle Krebs, executive analyst at Autotrader.
The deal could remove one cloud that hangs over Tesla. Investors fretted about the company’s ability to cope without Musk, a charismatic entrepreneur whose penchant for coming up with revolutionary ideas has drawn comparisons to one of Silicon Valley’s most revered visionaries, Apple co-founder Steve Jobs.
Tesla’s stock plummeted 14 per cent Friday after the SEC filed its lawsuit, erasing more than $7 billion in shareholder wealth. Many analysts predicted the shares were bound to fall even further if Musk had been forced to step down. Tesla’s stock has dropped 30 per cent since Aug. 7, closing Friday at $264.77.
The steep downturn in Tesla’s market value may have influenced Musk to have an apparent change of heart and negotiate a settlement. Musk had rejected a similar settlement offer before the SEC sued Thursday, maintaining he had done nothing wrong when he posted a tweet declaring that he had secured the financing to lead a buyout of Tesla.
The SEC alleged Musk wasn’t close to locking up the estimated $25 billion to $50 billion needed to pull off the buyout.
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Musk and Tesla reached their settlement without admitting to or denying the SEC’s allegations.
The resolution “is in the best interests of our markets and our investors, including the shareholders of Tesla,” SEC Chairman Jay Clayton said in a statement.
A Tesla spokeswoman said the company and Musk had no comment Saturday.
Besides paying a fine and stripping Musk of his chairman’s title, Tesla also must appoint two more directors who have no ties to the company or its management. Musk will be allowed to remain on the board.
The company also must clamp down on Musk’s communications with investors, a requirement that might make its colourful CEO’s Twitter posts slightly less interesting.
“Considering the drastic punishment the SEC had announced, Musk and Tesla got lucky,” said Krebs, the Autotrader analyst. “Musk at least remains at the helm of the company, and adding a couple of board members is a good thing.”
The SEC also got what it wanted by bringing the combative Musk down a notch and taking steps to tone down his off-the-cuff remarks while forcing Tesla to expand its board to counterbalance its CEO’s power, said Carl Tobias, a law professor at the University of Richmond. Besides being CEO, Musk owns a roughly 20 per cent stake in Tesla.
“Maybe this will make Musk stop acting so crazy and fly right,” Tobias said.
Besides tweeting about a deal that the SEC alleged he didn’t have money to pay for, Musk had been engaging in other erratic behaviour that had been raising questions about whether he should remain CEO.
Musk had raised hackles by ridiculing stock market analysts for posing fairly standard questions about Tesla’s shaky finances, and calling a diver who helped rescue 12 boys on a Thai soccer team from a flooded cave a pedophile, triggering a defamation lawsuit. He was also recently caught on a widely circulated video apparently smoking marijuana, a legal drug in Tesla’s home state of California.
The erratic behaviour has convinced more analysts that Tesla needs to find a replacement for Musk, but the SEC settlement will allow the company to do so on its own timetable, if it decides to hire a new leader.
Tesla is also under mounting pressure to overcome its past manufacturing problems and produce enough vehicles to become consistently profitable after years of huge losses.
A gauge of the company’s progress should come within the next few days when Tesla is expected to release its vehicle production numbers for the July-September period.
Musk has pledged Tesla would manufacture an average of 7,000 vehicles per week, enough to turn a profit.
Tesla needs to turn the financial corner because it has $1.3 billion in debt coming due during the next six months. If it keeps burning through its cash, Tesla will likely have to raise more money to pay its bills — something that analysts say will be easier to do without any lingering doubt who will be running the company.
Read more:
SEC sues Tesla, alleging it misled investors; seeks to bar Elon Musk from running a public company
Elon Musk says he may take Tesla private and shares soar
Public bravado, private doubts: How Elon Musk’s Tesla plan unravelled
https://www.cbc.ca/news/business/elon-musk-settlement-securities-fraud-charges-tesla-1.4844353
Tesla, CEO Elon Musk settle SEC fraud case for $40M
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Thomson Reuters · Posted: Sep 29, 2018 5:50 PM ET | Last Updated: 8 hours ago
U.S. securities regulators filed a complaint against Tesla CEO Elon Musk alleging that he made false and misleading statements about plans to take the company private in August. (Chris Carlson/Associated Press)
Tesla and Elon Musk have agreed to pay $20 million US each to financial regulators and the billionaire will step down as the company's chairman but remain as chief executive, under a settlement that caps a tumultuous two months for the car-maker.
The securities fraud agreement, announced by the Securities and Exchange Commission (SEC) on Saturday, will come as a relief to investors, who had worried that a lengthy legal fight would only further hurt the loss-making electric car company.
The SEC said Musk, 47, misled investors with tweets on Aug. 7 in which he said he was considering taking Tesla private and had secured funding.
The regulator had alleged in a lawsuit on Thursday that the tweets had no basis in fact, and said the market chaos that ensued hurt investors.
The SEC charges against Musk on Friday shaved about $7 billion US off high-flying Tesla, knocking its market value to $45.2 billion US on Friday, below General Motors Co's $47.5 billion US.
In the settlement, the agency pulled back from its demand that Musk, who is synonymous with the Tesla brand, be barred from running Tesla, a sanction that many investors said would be disastrous.
U.S. Securities and Exchange Commission officials are seen at a news conference in Washington on Thursday. The SEC charges against Musk on Friday shaved about $7 billion US off high-flying Tesla, knocking its market value to $45.2 billion US on Friday, below General Motors Co's $47.5 billion US. (Zach Gibson/Getty Images)
"I think this is the best possible outcome for everyone involved," said Ivan Feinseth of Tigress Financial Partners, who rates Tesla "neutral," who added the SEC's penalty was only a slap on the wrist for Musk.
"The fact that he can remain CEO is very important for the company."
Neither Musk nor Tesla admitted or denied the SEC's findings as part of the settlement. Tesla and Musk did not immediately respond to requests for comment.
Agreement could strengthen Tesla
Investors and corporate governance experts said on Saturday that the agreement could strengthen Tesla, which has been bruised by Musk's recent volatile behavior. He was filmed smoking marijuana and wielding a sword on a webcast this month just hours before Tesla said its recently-appointed accounting chief would leave.
The entrepreneur had been directly involved in almost every detail of Tesla's product design and technology strategy, and drove the company's employees to extraordinary achievements - much as another Silicon Valley chief executive, Steve Jobs, did at Apple Inc.
Musk is now required to step down as chairman of Tesla within 45 days, and he is not permitted to be re-elected to the post for three years. Tesla is required to appoint two new independent directors to its board, a move Feinseth should strengthen the company.
The SEC charged Tesla with failing to have required disclosure controls and procedures for Musk's tweets. The SEC said the company had no way to determine if his tweets contained information that must be disclosed in corporate filings, or if they contained complete and accurate information.
Musk walked away at the last minute from an earlier settlement with the SEC that would have required him to give up key leadership roles at the company for two years and pay a nominal fine, according to media reports on Friday.
Tesla has been pushing hard to meet production targets for its electric cars. (Stephen Lam/Reuters)
Investors said on Friday that it has been a big mistake for Musk to turn down that settlement, especially at a time when the company has been pushing hard to meet production targets.
The settlement tasks the Tesla board, which many critics have accused of failing to rein in Musk, with the tricky challenge of finding an independent chairman who is able to work closely with the often emotional and unpredictable chief executive.
Musk, who has often turned to Twitter to promote Tesla and confront critics, said on Thursday that the SEC's actions were unjustified. Tesla shares jumped after his Aug. 7 tweets, a blow to short-sellers betting on the stock's decline.
As CEO, Musk had gained legions of fans for his bold approach to business and technology. He used his Twitter account to promote the achievements of Tesla, his rocket launch company SpaceX, and other projects such as his tunnel venture, the Boring Co, to his nearly 23 million followers.
CBC's Journalistic Standards and Practices
Report Typo or Error|Send Feedback
