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Elon Musk Resigns As Tesla Chairman After Whirlwind Of Controversy

The Securities and Exchange Commission (SEC) reached a settlement with Tesla CEO Elon Musk. The terms state that Musk doesn't admit or deny the allegations in the agency's lawsuit against him, though he will resign as chairman of the company's board of directors for three years and pay a $20 million fine.

According to Business Insider, the SEC sued Musk after he rejected a settlement, which would have had him resign for two years, add two independent directors to the board, and pay a fine. The agency claimed Musk had written a series of "false and misleading" tweets and he "knew or was reckless in not knowing" that he was misleading investors. The lawsuit sought to bar the entrepreneur from running public companies, including Tesla, as well as impose a fine.

On Aug 7, 2018, Musk told his 22 million Twitter followers that he might take Tesla private at $420 per share and that there was "funding secured." Afterward, he added that "investor support is confirmed" and a "special purpose fund" might be created for investors who stay with Tesla. The SEC, however, said Musk did not discuss or confirm key deal terms including price with any funding source.

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Via Tesla

Musk, 47, responded to the lawsuit by saying, "This unjustified action by the SEC leaves me deeply saddened and disappointed. I have always taken action in the best interests of truth, transparency, and investors... and the facts will show I never compromised this in any way."

After the lawsuit was announced, Tesla's share price plummeted, trading more than 10 percent lower when financial markets opened on Friday. The fall in share prices indicated a $5 billion loss from the electric car company's market value. Tesla's stock price had increased by more than 6 percent after Musk's first tweet until the close of trading on Aug. 7, 2018, and had closed up 10.98 percent from the day before, according to the SEC.

Markets.com Chief Market Analyst Neil Wilson said Friday's drop indicated Tesla investors are worried about the future. "Without Musk it's going to be hard to raise the kind of capital that is still required,” he said. "Its future without Musk would be highly uncertain and the company could now become a target."

Via El Independiente

The settlement is unusual since it allows Musk to remain as CEO after stepping down as chairman. The SEC may have decided that removing Musk as CEO would negatively impact shareholders. However, the speed of the resolution may be intended to send a message to other executives, reminding officers, and directors at public companies that they must tread lightly when making statements that can affect their company's stock price.

The lawsuit, filed in a federal court in Manhattan, made Musk one of the highest-profile executives to be accused by the SEC of securities fraud. The SEC, however, cannot enforce criminal charges. The entrepreneur is the co-founder of Tesla and has served as chief executive since 2008.

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