Though Elon Musk is allowed to remain the CEO of Tesla, in August Musk set off a chain of entirely preventable events by tweeting that he was “considering taking Tesla private at $420. Funding secured.”
Musk did not provide any further details hence the Securities and Exchange Commission (SEC) determined that he never finalised any kind of deal with Saudi sovereign wealth fund and since then slapped Musk with fraud charges for making “false and misleading” statements and did not comply with regulatory requirements.
SEC in a statement stated that “The SEC also today charged Tesla with failing to have required disclosure controls and procedures relating to Musk’s tweets, a charge that Tesla has agreed to settle. The settlements, which are subject to court approval, will result in comprehensive corporate governance and other reforms at Tesla—including Musk’s removal as Chairman of the Tesla board—and the payment by Musk and Tesla of financial penalties.”
On Saturday Elon Musk agreed to pay the $20 million fine imposed on him and has agreed to step down as board chairman pf the automaker within 45 days and be barred from the position for 3 years as a part of a settlement with the Securities and Exchange Commission. Tesla will be paying another $20 million and will add two new independent directors to the board and will monitor the billionaire’s public communications closely.
Elon Musk can continue being Tesla’s CEO and run day to day operations of the company, he did not have to admit to wrongdoing as a part of the deal.
SEC also alleged that Musk chose the 420 in his tweet specifically cause “he calculated the $420 price per share based on a 20% premium over that day’s closing share price because he thought 20% was a “standard premium” in going-private transactions. This calculation resulted in a price of $419, and Musk stated that he rounded the price up to $420 because he had recently learned about the number’s significance in marijuana culture and thought his girlfriend “would find it funny, which admittedly is not a great reason to pick a price.”.
If the SEC didn’t settle with Musk then they could have “prohibited him from acting as an officer or director of a public company”