Elon Musk is stepping down as chairman of Tesla as part of a settlement reached with the Securities and Exchange Commission. The man behind companies like Tesla, SpaceX, and The Boring Company will be allowed to remain CEO, but he must vacate his position as chairman of the board within 45 days and cannot seek re-election for three years. Tesla has also agreed to pay a $20 million fine as part of the settlement stemming from a tweet he posted announcing that he had secured funding to take Tesla private.
Elon Musk’s unpredictable, free-wheeling style of tweeting has come back to bite him in the ass. The Tesla chairman and CEO tweeted in August his plans to take Tesla private at $420 per share, adding that he had “funding secured” to make it happen.
That single tweet created a maelström of controversy that reached all the way to the Securities and Exchange Commission.
Tesla’s stock, for instance, plummeted by 14 percent last Friday to $264.77, wiping out almost $7.5 billion in shareholder value. A report from Bloomberg indicates that Tesla’s plunging stock is as clear a sign as any that a deal with the SEC should be completed as soon as possible. Musk has accepted the deal with the SEC, though court documents reveal that he did so “without admitting or denying the allegations of the complaint.”
The settlement comes at the heels of the SEC’s lawsuit, which it filed last week after Musk refused an earlier settlement offer. The initial deal was actually more lenient than the one Musk accepted — Tesla would have to pay a “nominal fine” and Musk would have to vacate his chairman role for two years — but he refused to settle earlier, claiming that he would not be “truthful to himself” if he settled with the SEC.
That he eventually agreed to settle on harsher penalties is an indication that the SEC would have enforced its full might on the company if the issues are taken to court. John Coffee, a professor at Columbia Law School, told CNN that the threat to strip Musk of his roles in the company was a “nuclear threat to force him to settle.”
It’s worth noting that even if Musk vacates his role as chairman for three years, he will still continue his role as Tesla CEO, something Jay Dubow, a partner at Pepper Hamilton and a veteran of the SEC’s enforcement division, told CNN is a surprising concession on the agency’s part part considering that if Musk’s conduct really was as egregious as the SECn believed, it would go after his role as CEO. "The CEO is certainly more involved than the chairman in day-to-day operations,” Dubow added.
Even with the settlement, Musk maintains that he didn’t do anything wrong, even going so far as to claim that the SEC’s lawsuit was “unjustified.”
"I have always taken action in the best interests of truth, transparency, and investors," he said. "Integrity is the most important value in my life, and the facts will show I never compromised this in any way."
Even if he thinks that way, the settlement with the SEC suggests that there’s more to this controversy than meets the eye. Maybe it was Musk’s way of preventing further investor damage to Tesla, or maybe it was the company forcing Musk to settle. Either way, Musk’s influence on the company has been severely undercut, all because of a single tweet.
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