https://fudzilla.com/news/automotive/47288-elon-musk-fired-as-chairman-of-tesla
Elon Musk fired as chairman of Tesla
By SEC, still remains the CEO
Twitter is a dangerous tool and there is no going back when you are followed by millions. Due to his tweet about Tesla becoming a private company, after perhaps an ill-judged tweet, Tesla and Elon have to split a $40 million fine and Elon has to resign as chairman of the board within 60 days.
This is an epilogue to the US Securities and Exchange Commission accusing Tesla CEO Elon Musk of fraud and seeking to remove him from his role in charge of the electric car company.
It's not too bad, as he will still remain the CEO of the company, and that is definitely more of a direct role than the chairman. Losing a chairman of the board seat definitely hurts as being both chairman and CEO gives you much greater power than just being the CEO itself. In theory, a CEO reports to the chairman and the board elects and approves the CEO. Elon has 22 million followers on Twitter and not being half naked on the tweets and pictures and smoking wacky baccy, is a great accomplishment.
He got an easy time from this, as he could have been fired as a CEO too because he created a huge fluctuation in the stock value based on a false statement that got retracted. Dell went private at one moment, and this is quite a great thing if you can afford it. You don’t mess with the US Security and Exchange Commission as that tweet has caused people to lose/win money and it didn’t come true, that is the upsetting part. Money talks.
Going private gives a company the power to do risky things without the need to get approval from the board or large shareholders. It is a matter of saying you are your own boss and can do pretty much anything that's legal, and not necessarily within reason. It worked out for Dell it seems, but Dell wants to go public again and make money on an IPO again.
Tesla is definitely a nice change of pace in the sleepy automotive industry and as we have mentioned here a few times, we see Tesla as a 10-kilometer race pacemaker which will help the self-driving and electric car race even faster, but with very little chances of winning.
The fact that Tesla can still get away suckering the mainstream press that the Tesla 3 is a bargain at $35,000 is amazing. The simple fact is it will cost you $43,000 for the cheapest model that has shipped to date plus tax. Don’t get us even started on its delivery plans and dates as every single one was pushed and broken due to a super optimistic and often very unrealistic prognosis on shipping dates. And that comes from a company that is just learning about mass car production.
Losing overall control over Tesla might be a good thing as Elon does need a babysitter. The new chairman of the board will definitely have a tough time controlling the reckless Twitter-mad CEO, but, again, if Elon makes another flop with the SEC like the tweet that got him in his current trouble, he will most certainly lose the CEO seat if not worse.
One of the good things about the Twitter Musk case is that neither he nor Tesla have to admit wrong doing which is, for someone with a big ego, a great big win.
https://www.scmp.com/news/world/uni...musk-must-be-fired-tesla-ceo-shareholders-say
Elon Musk must be fired as Tesla CEO, shareholders say as company struggles
As Tesla struggles, many shareholders are looking to oust Elon Musk and three of the board’s directors – but they’ll have a fight on their hands
Associated Press
Updated: Saturday, 29 Sep, 2018 2:36pm
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Elon Musk pauses at a press conference following the first launch of a SpaceX Falcon Heavy rocket at the Kennedy Space Center in Cape Canaveral, Florida, in February. Photo: Reuters
With Tesla in trouble, some investors think it’s time to shake up the board of directors: on Tuesday, shareholders will vote whether to replace Elon Musk as board chairman and dump three directors.
The campaign to reform the board has been spearheaded by CtW Investment Group, a specialist in managing union-sponsored pension funds.
Tesla says Brussels driver didn’t have Autopilot on when he crashed
In a written argument to shareholders, CtW said Tesla’s “strategic and operational challenges” and “deteriorating financial performance” warrant a major change on the board of directors, and the board has been “unduly deferential” toward Musk.
Musk unveils the Roadster 2 during a presentation in Hawthorne, California, last November. Photo: Tesla/Handout via Reuters
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Corporate governance advisory group Glass Lewis is advising shareholders to vote no for three Tesla board members up for reelection: 21st Century Fox CEO James Murdoch; venture capitalist Antonio Gracias; and Musk’s younger brother, Kimbal.
Glass Lewis also supports a nonbinding resolution to appoint an independent board chairman to replace Musk, with Musk keeping his job as CEO.
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Tesla announces new China CFO: former General Motors exec James Zhou
Meanwhile, shareholder adviser Institutional Shareholder Services (ISS) opposes re-election of Murdoch and Gracias but supports Kimbal Musk.
ISS recommends a yes vote on removing Elon Musk as chairman. That proposal was put forth by shareholder activist Jing Zhao, who said: “I believe a big company cannot depend totally and so heavily on one person.”
The concerns boil down to two main issues.
A man cleans a Tesla Model 3 car during a media preview at the Auto China 2018 motor show in Beijing, China, in April. Photo: Reuters
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They are whether the board’s independent directors are truly independent, and whether Murdoch and Chief Executive Musk are so busy with other matters that they can’t devote sufficient time and energy to Tesla at a crucial stage in the company’s history.
“It is important that the board of directors take steps to ensure that management remains focused on resolving the manufacturing challenges, and that the CEO and other executives do not get distracted by outside business interests or Twitter fights,” said Institutional Shareholder Services in a report to clients.
The company’s financial position “has deteriorated along every dimension,” CtW said.
Teslas ‘crash with Autopilot engaged’ in California and Greece
Few, if any, expect the votes to pass. In past years, shareholders have overwhelmingly supported the company against activists. And Musk owns 21.9 per cent of Tesla voting shares.
But some advocates – concerned about a lack of independent voices on the board – expect the number of “dump” votes will be big enough to force Musk and Tesla to pay more attention to investor concerns.
“I don’t know if anyone will be voted out of office,” said Kern McPherson, senior director of North American research at Glass Lewis.
“But I think there’s a very good chance that Tesla will have to respond to elevated ‘vote against’ levels.”
Tesla declined to comment or make board members available. Company comments can be found in the proxy statement covering the issue.
Elon Musk talks up Tesla’s new Model 3 versions
Tesla has posted only two profitable quarters in its 14-year history, and losses have increased lately.
Model 3 production problems are the prime cause of Tesla’s financial distress. Musk himself regards the all-electric saloon, which went on sale in July 2017, as crucial to the company’s success.
Cars are lined up near the Tesla Motors factory complex in Fremont, California, in January. Photo: Bay Area News Group
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Musk had forecast an annual production level of about 400,000 Model 3s by now, but Tesla is struggling to achieve a quarter of that.
Capital spending was set to support 400,000 cars, but revenues have fallen far short of projections, so the company’s cash-burn rate is rising with no earnings available for replenishment.
Driver dies after Tesla crashes through fence and into pond in California
Musk promises profits in the year’s second half, and he rejects the notion that Tesla will need to raise new equity or debt in 2018.
Tesla has said in government filings that the board is focused on the company’s “long-term” performance.
This article appeared in the South China Morning Post print edition as: Investors to vote on replacing Tesla board
https://finance.yahoo.com/news/feds-tell-tesla-fire-elon-151100374.html
Will the Feds Tell Tesla to Fire Elon Musk Over Tweets?
John Rosevear, The Motley Fool
Motley FoolFebruary 26, 2019
Once again, Elon Musk is in trouble for tweets. The U.S. Securities and Exchange Commission (SEC) on Monday asked a federal court judge to hold the Tesla (NASDAQ: TSLA) CEO in contempt for violating an agreement that requires him to get advance approval for Tesla-related social media posts.
It might seem trivial -- who cares about a few tweets? -- but this could result in Musk's leaving Tesla, at least for a while. Legally speaking, Musk's Tesla-related tweets are considered investor communications, and it's not OK for a company to give forward-looking guidance that it knows it won't meet. Among the potential penalties: Musk could be barred from acting as CEO of Tesla (or any other public company) for a time.
Here's what we know.
A dark gray Tesla Model 3, a compact luxury sports sedan.
How many vehicles will Tesla make in 2019? It depends on when you asked, and that's a problem. Image source: Tesla.
Why the SEC wants a judge to hold Musk in contempt
Here's the background: Last year, the SEC sued Musk and Tesla over Musk's now-famous "funding secured" tweet, in which he (falsely) claimed that Tesla would soon go private at $420 per share. The case was quickly settled after Musk and Tesla agreed to pay fines and accept some limitations, including a provision that required Tesla to preapprove any company-related communications from Musk that might contain material information.
In a court filing on Monday, the SEC argued that Musk breached that agreement with a tweet on Feb. 19 that didn't follow the agreed-on preapproval process.
A few hours later, after consulting with the lawyer assigned to monitor his tweets, Musk tweeted an amendment.
Apparently, the amendment made the SEC suspicious. The commission contacted Musk and Tesla the next day, asking them to confirm whether Musk had complied with the preapproval procedures before posting that first tweet. After learning that he had not, the commission decided to ask the court to hold Musk in contempt.
What's the big deal? Won't this just blow over?
It's possible that Musk will receive the equivalent of a slap on the wrist -- a token fine or something. But there's one possible consequence that could be very significant for Tesla investors: Musk could be barred -- legally barred -- from being an officer or director of any public company for a period.
That would end his tenure as CEO of Tesla, at least for a while. And given that some huge percentage of Tesla's sky-high valuation is about its future potential as outlined by Musk, it seems likely that a penalty that bars Musk from serving as Tesla's CEO (or on the company's board) would clobber the stock price.
But how likely is it that the SEC would go that far? Wall Street analysts are skeptical. J.P. Morgan auto analyst Ryan Brinkman, who has an "underweight" rating on Tesla, acknowledged in a note on Tuesday morning that Musk could be removed in a "worst-case scenario."
But Brinkman feels that this latest kerfuffle is much less serious than the allegations following Musk's "funding secured" tweet last year -- and he thinks that Tesla's stock won't implode even if Musk is forced to step away from the company for a time. "If the SEC were to seek Mr. Musk's removal (perhaps subject to yet another settlement), we believe the shares may approach the mid-$200 levels," he wrote.
https://www.pressdemocrat.com/business/8793017-181/tesla-ceo-elon-musk-company
Tesla CEO Elon Musk, company settle fraud suit for $40 million
Tesla chief Elon Musk speaks during a Boring Co. event in Los Angeles, California. MUST CREDIT: Bloomberg photo by Patrick T. Fallon.
SAN FRANCISCO — Tesla and its CEO Elon Musk have agreed to pay a total of $40 million 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.
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 percent 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 percent 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.
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 colorful 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 percent 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 behavior 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 behavior 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.
Elon Musk fired as chairman of Tesla
By SEC, still remains the CEO
Twitter is a dangerous tool and there is no going back when you are followed by millions. Due to his tweet about Tesla becoming a private company, after perhaps an ill-judged tweet, Tesla and Elon have to split a $40 million fine and Elon has to resign as chairman of the board within 60 days.
This is an epilogue to the US Securities and Exchange Commission accusing Tesla CEO Elon Musk of fraud and seeking to remove him from his role in charge of the electric car company.
It's not too bad, as he will still remain the CEO of the company, and that is definitely more of a direct role than the chairman. Losing a chairman of the board seat definitely hurts as being both chairman and CEO gives you much greater power than just being the CEO itself. In theory, a CEO reports to the chairman and the board elects and approves the CEO. Elon has 22 million followers on Twitter and not being half naked on the tweets and pictures and smoking wacky baccy, is a great accomplishment.
He got an easy time from this, as he could have been fired as a CEO too because he created a huge fluctuation in the stock value based on a false statement that got retracted. Dell went private at one moment, and this is quite a great thing if you can afford it. You don’t mess with the US Security and Exchange Commission as that tweet has caused people to lose/win money and it didn’t come true, that is the upsetting part. Money talks.
Going private gives a company the power to do risky things without the need to get approval from the board or large shareholders. It is a matter of saying you are your own boss and can do pretty much anything that's legal, and not necessarily within reason. It worked out for Dell it seems, but Dell wants to go public again and make money on an IPO again.
Tesla is definitely a nice change of pace in the sleepy automotive industry and as we have mentioned here a few times, we see Tesla as a 10-kilometer race pacemaker which will help the self-driving and electric car race even faster, but with very little chances of winning.
The fact that Tesla can still get away suckering the mainstream press that the Tesla 3 is a bargain at $35,000 is amazing. The simple fact is it will cost you $43,000 for the cheapest model that has shipped to date plus tax. Don’t get us even started on its delivery plans and dates as every single one was pushed and broken due to a super optimistic and often very unrealistic prognosis on shipping dates. And that comes from a company that is just learning about mass car production.
Losing overall control over Tesla might be a good thing as Elon does need a babysitter. The new chairman of the board will definitely have a tough time controlling the reckless Twitter-mad CEO, but, again, if Elon makes another flop with the SEC like the tweet that got him in his current trouble, he will most certainly lose the CEO seat if not worse.
One of the good things about the Twitter Musk case is that neither he nor Tesla have to admit wrong doing which is, for someone with a big ego, a great big win.
https://www.scmp.com/news/world/uni...musk-must-be-fired-tesla-ceo-shareholders-say
Elon Musk must be fired as Tesla CEO, shareholders say as company struggles
As Tesla struggles, many shareholders are looking to oust Elon Musk and three of the board’s directors – but they’ll have a fight on their hands
Associated Press
Updated: Saturday, 29 Sep, 2018 2:36pm
TOP PICKS
News
Elon Musk must be fired as Tesla CEO, furious shareholders say
29 Sep 2018
News
‘Like pulling teeth’: China, US far apart on structural changes by Beijing
15 Feb 2019
News
‘Speak English’: US author attacks clean-up queen Marie Kondo
6 Feb 2019
News
North Korea suspected of kidnapping defector’s daughter in Rome
21 Feb 2019
News
UK finance minister scraps China trip amid warship tensions
18 Feb 2019
0
27
Elon Musk pauses at a press conference following the first launch of a SpaceX Falcon Heavy rocket at the Kennedy Space Center in Cape Canaveral, Florida, in February. Photo: Reuters
With Tesla in trouble, some investors think it’s time to shake up the board of directors: on Tuesday, shareholders will vote whether to replace Elon Musk as board chairman and dump three directors.
The campaign to reform the board has been spearheaded by CtW Investment Group, a specialist in managing union-sponsored pension funds.
Tesla says Brussels driver didn’t have Autopilot on when he crashed
In a written argument to shareholders, CtW said Tesla’s “strategic and operational challenges” and “deteriorating financial performance” warrant a major change on the board of directors, and the board has been “unduly deferential” toward Musk.
Musk unveils the Roadster 2 during a presentation in Hawthorne, California, last November. Photo: Tesla/Handout via Reuters
Share:
Corporate governance advisory group Glass Lewis is advising shareholders to vote no for three Tesla board members up for reelection: 21st Century Fox CEO James Murdoch; venture capitalist Antonio Gracias; and Musk’s younger brother, Kimbal.
Glass Lewis also supports a nonbinding resolution to appoint an independent board chairman to replace Musk, with Musk keeping his job as CEO.
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By registering for these newsletters you agree to our T&C and Privacy Policy
Tesla announces new China CFO: former General Motors exec James Zhou
Meanwhile, shareholder adviser Institutional Shareholder Services (ISS) opposes re-election of Murdoch and Gracias but supports Kimbal Musk.
ISS recommends a yes vote on removing Elon Musk as chairman. That proposal was put forth by shareholder activist Jing Zhao, who said: “I believe a big company cannot depend totally and so heavily on one person.”
The concerns boil down to two main issues.
A man cleans a Tesla Model 3 car during a media preview at the Auto China 2018 motor show in Beijing, China, in April. Photo: Reuters
Share:
They are whether the board’s independent directors are truly independent, and whether Murdoch and Chief Executive Musk are so busy with other matters that they can’t devote sufficient time and energy to Tesla at a crucial stage in the company’s history.
“It is important that the board of directors take steps to ensure that management remains focused on resolving the manufacturing challenges, and that the CEO and other executives do not get distracted by outside business interests or Twitter fights,” said Institutional Shareholder Services in a report to clients.
The company’s financial position “has deteriorated along every dimension,” CtW said.
Teslas ‘crash with Autopilot engaged’ in California and Greece
Few, if any, expect the votes to pass. In past years, shareholders have overwhelmingly supported the company against activists. And Musk owns 21.9 per cent of Tesla voting shares.
But some advocates – concerned about a lack of independent voices on the board – expect the number of “dump” votes will be big enough to force Musk and Tesla to pay more attention to investor concerns.
“I don’t know if anyone will be voted out of office,” said Kern McPherson, senior director of North American research at Glass Lewis.
“But I think there’s a very good chance that Tesla will have to respond to elevated ‘vote against’ levels.”
Tesla declined to comment or make board members available. Company comments can be found in the proxy statement covering the issue.
Elon Musk talks up Tesla’s new Model 3 versions
Tesla has posted only two profitable quarters in its 14-year history, and losses have increased lately.
Model 3 production problems are the prime cause of Tesla’s financial distress. Musk himself regards the all-electric saloon, which went on sale in July 2017, as crucial to the company’s success.
Cars are lined up near the Tesla Motors factory complex in Fremont, California, in January. Photo: Bay Area News Group
Share:
Musk had forecast an annual production level of about 400,000 Model 3s by now, but Tesla is struggling to achieve a quarter of that.
Capital spending was set to support 400,000 cars, but revenues have fallen far short of projections, so the company’s cash-burn rate is rising with no earnings available for replenishment.
Driver dies after Tesla crashes through fence and into pond in California
Musk promises profits in the year’s second half, and he rejects the notion that Tesla will need to raise new equity or debt in 2018.
Tesla has said in government filings that the board is focused on the company’s “long-term” performance.
This article appeared in the South China Morning Post print edition as: Investors to vote on replacing Tesla board
https://finance.yahoo.com/news/feds-tell-tesla-fire-elon-151100374.html
Will the Feds Tell Tesla to Fire Elon Musk Over Tweets?
John Rosevear, The Motley Fool
Motley FoolFebruary 26, 2019
Once again, Elon Musk is in trouble for tweets. The U.S. Securities and Exchange Commission (SEC) on Monday asked a federal court judge to hold the Tesla (NASDAQ: TSLA) CEO in contempt for violating an agreement that requires him to get advance approval for Tesla-related social media posts.
It might seem trivial -- who cares about a few tweets? -- but this could result in Musk's leaving Tesla, at least for a while. Legally speaking, Musk's Tesla-related tweets are considered investor communications, and it's not OK for a company to give forward-looking guidance that it knows it won't meet. Among the potential penalties: Musk could be barred from acting as CEO of Tesla (or any other public company) for a time.
Here's what we know.
A dark gray Tesla Model 3, a compact luxury sports sedan.
How many vehicles will Tesla make in 2019? It depends on when you asked, and that's a problem. Image source: Tesla.
Why the SEC wants a judge to hold Musk in contempt
Here's the background: Last year, the SEC sued Musk and Tesla over Musk's now-famous "funding secured" tweet, in which he (falsely) claimed that Tesla would soon go private at $420 per share. The case was quickly settled after Musk and Tesla agreed to pay fines and accept some limitations, including a provision that required Tesla to preapprove any company-related communications from Musk that might contain material information.
In a court filing on Monday, the SEC argued that Musk breached that agreement with a tweet on Feb. 19 that didn't follow the agreed-on preapproval process.
A few hours later, after consulting with the lawyer assigned to monitor his tweets, Musk tweeted an amendment.
Apparently, the amendment made the SEC suspicious. The commission contacted Musk and Tesla the next day, asking them to confirm whether Musk had complied with the preapproval procedures before posting that first tweet. After learning that he had not, the commission decided to ask the court to hold Musk in contempt.
What's the big deal? Won't this just blow over?
It's possible that Musk will receive the equivalent of a slap on the wrist -- a token fine or something. But there's one possible consequence that could be very significant for Tesla investors: Musk could be barred -- legally barred -- from being an officer or director of any public company for a period.
That would end his tenure as CEO of Tesla, at least for a while. And given that some huge percentage of Tesla's sky-high valuation is about its future potential as outlined by Musk, it seems likely that a penalty that bars Musk from serving as Tesla's CEO (or on the company's board) would clobber the stock price.
But how likely is it that the SEC would go that far? Wall Street analysts are skeptical. J.P. Morgan auto analyst Ryan Brinkman, who has an "underweight" rating on Tesla, acknowledged in a note on Tuesday morning that Musk could be removed in a "worst-case scenario."
But Brinkman feels that this latest kerfuffle is much less serious than the allegations following Musk's "funding secured" tweet last year -- and he thinks that Tesla's stock won't implode even if Musk is forced to step away from the company for a time. "If the SEC were to seek Mr. Musk's removal (perhaps subject to yet another settlement), we believe the shares may approach the mid-$200 levels," he wrote.
https://www.pressdemocrat.com/business/8793017-181/tesla-ceo-elon-musk-company
Tesla CEO Elon Musk, company settle fraud suit for $40 million
Tesla chief Elon Musk speaks during a Boring Co. event in Los Angeles, California. MUST CREDIT: Bloomberg photo by Patrick T. Fallon.
SAN FRANCISCO — Tesla and its CEO Elon Musk have agreed to pay a total of $40 million 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.
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 percent 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 percent 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.
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 colorful 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 percent 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 behavior 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 behavior 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.
