Tesla’s Elon Musk has reached a settlement with the Securities and Exchange Commission (SEC), in an agreement that will require Musk to resign as chairman of the company for at least three years and pay a $20 million fine, the SEC announced Saturday.
Musk, who as part of the agreement will neither admit nor deny the allegations, is expected to remain CEO.
US regulators were alleging that Musk had made “false and misleading” statements after he tweeted about taking the automaker private.
“Am considering taking Tesla private at $420. Funding secured,” Musk said on Twitter in August. The tweets caused Tesla’s stock price to jump by more than six percent shortly afterward, leading to “significant market disruption.”
Musk has been directly involved in almost every detail of Tesla’s product development and technology strategy, and is credited as the driving force behind the loss-making company’s ability to raise capital.
The billionaire entrepreneur said he had done nothing wrong and the company’s board said it supported him.
Musk, 47, walked away at the last minute from a 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 reports on Friday.
Musk has hired Stephen Best at Brown Rudnick, who successfully defended internet billionaire Mark Cuban in an insider trading case, according to people familiar with the plans who also asked not to be identified.
These allegations also come soon after Musk was recorded live on YouTube smoking marijuana with Rogan. This video led to Tesla’s share prices dropping drastically by 6% and the resignation of the Heads of Accounting and Human Resources. Therefore, news of the resignation of Tesla’s ‘maverick’ has come as no shock to many people.
A Rise in Tesla’s Share Price
Tesla is ripping higher Monday morning on word CEO Elon Musk settled fraud charges with the Securities and Exchange Commission. Shares were up more than 15% ahead of the opening bell, trading at about $305 apiece, and have made back nearly all of the losses that occurred Friday in the wake of the SEC’s lawsuit against Musk.
While Monday’s rally is good news for Tesla shareholders, it will surely be painful for short sellers, or those betting against the stock. That group made more than $1 billion as shares plunged nearly 14% on Friday, but those who didn’t cover their positions were set to see a large portion of their gains wiped away at Monday’s opening.
And that is likely to give Musk a reason to celebrate. He has long despised those betting against Tesla shares. In its complaint, the SEC noted Musk’s dismay for that group of investors.