The Securities and Exchange Commission reached a settlement with Tesla CEO Elon Musk on Saturday. Under the terms of the settlement, Musk doesn't admit or deny the allegations in the agency's lawsuit against him, but he will step down as the chairman of Tesla's board of directors for three years and pay a $20 million fine.
The agency sued Musk on Thursday after he reportedly rejected a settlement under which he would have had to step down as board chairman for two years, add two independent directors to the company's board, and pay a nominal fine, according to CNBC. The SEC alleged in the lawsuit that Musk made "false and misleading statements" in August about the possibility of taking the Tesla private. The agency sought to bar Musk from being an officer or director of a public company.
The SEC alleged that Musk said a representative from Saudi Arabia's Public Investment Fund had shown interest in taking Tesla private but that Musk had never discussed any of the specific terms he described on Twitter with the Saudi fund or any other potential backers before making them public. According to the SEC, those terms included a proposed $420 share price and an option for all existing Tesla shareholders to remain with the company after it went private.
Musk said in a company statement Thursday that he was "deeply saddened and disappointed" by the lawsuit, which he described as "unjustified."
Here's how four legal experts reacted to the SEC's settlement with Musk.
Gregory Sichenzia — partner at Sichenzia Ross Ference
- The fine Musk received was likely higher than other CEOs would have paid.
- But other CEOs would have likely had to step down from the position.
Jay Dubow — partner at Pepper Hamilton
- It's unusual that Musk will step down as chairman but remain CEO, since executives usually have to resign from both positions when they settle with the SEC in similar situations.
- The SEC may have determined that removing Musk as CEO would have been bad for shareholders.
- The settlement is good for Musk and Tesla since it eliminates the uncertainty the company would have faced if it had to find a new CEO.
- The settlement is good for the SEC since it received a lot of attention and sent a message to other executives.
JR Lanis — partner at Drinker Biddle
- The speed with which the settlement was reached is surprising
- Being able to remain CEO is a victory for Musk.
- The SEC is likely happy that it was able to settle with Musk quickly so the lawsuit wouldn't affect Tesla's stock indefinitely.
Renato Mariotti — partner at Thompson Coburn
- The settlement is a reminder that officers and directors at public companies must be careful when they make statements that can affect their company's stock price.
- Musk's "funding secured" tweet may be the most expensive tweet ever.
Have a Tesla news tip? Contact this reporter at mmatousek@bjinnox.com.
