By on September 29, 2018

Image: JRE/YouTube

Consequences have come swiftly for Elon Musk.

Less than two months after he tweeted that he had secured enough funding to take Tesla back private, and just a few days after being charged with securities fraud, Musk has settled with the Securities and Exchange Commission after the SEC charged him with “false and misleading” statements and a failure to properly notify the regulators of material company events.

The settlement is still subject to court approval, but it requires Musk to step down as chairman of the board for at least three years and to pay a civil penalty of $20 million. He must step down from the chairman role within 45 days, but he will remain CEO. Tesla itself will also be slapped with a $20 million fine. It’s expected that Tesla will add two new and independent directors to the board.

“Musk tweeted on August 7, 2018 that he could take Tesla private at $420 per share — a substantial premium to its trading price at the time — that funding for the transaction had been secured, and that the only remaining uncertainty was a shareholder vote,” the SEC said. “In truth, Musk knew that the potential transaction was uncertain and subject to numerous contingencies. Musk had not discussed specific deal terms, including price, with any potential financing partners, and his statements about the possible transaction lacked an adequate basis in fact.”

More from the SEC: “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.”

Musk has continually tweeted himself and Tesla into hot water, but this obviously goes beyond bad PR or a drop in stock price. Part of the settlement is an agreement by Tesla that its board will “oversee” Musk’s communications with investors. It’s unclear if this means his tweets will be filtered before they hit the web. Whether the changes in Musk’s role and communications with investors will result in a better-run company remains to be seen.

Also remaining to be seen — the effect on the company’s stock price. It was down about 14 percent at closing time Friday, to $264 a share.

[Image: JRE/YouTube]

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52 Comments on “Elon Musk Steps Down as Chairman, Settles with SEC...”


  • avatar
    analogman

    It’s about freakin’ time. Long past time, actually. Musk fanboys and all that ‘disrupting’ stuff notwithstanding, if any other CEO of a public company had done a fraction of the crap Musk has pulled, they would have been shown the door long ago.

    Being the CEO of a public company carries a lot of serious, heavy responsibilities. A few exceptional geniuses aside, history suggests that it’s rare for the skills needed to be a ‘disruptive’ entrepreneurial founder, and a seasoned executive experienced in the complexities of executing large-scale manufacturing and mature investor relations, are found in the same person.

    • 0 avatar
      NormSV650

      Hallelujah!

    • 0 avatar
      Lockstops

      So far it looks like he’ll remain as CEO.

      I just think the SEC cut him too easy of a deal. Well, the lawsuits from shorters and shareholders regarding that tweet will hopefully finish the job.

    • 0 avatar
      stuki

      In free countries, where enterprises are not state owned and/or controlled, exactly what qualifications is desired for some job, is up to the enterprise’s owners. Not tax feeding ambulance chasers out for notoriety, bragging points and “achievements” to put on their resume.

      Nothing stops Tesla from firing Musk nor anyone else, should they deem it in the company’s best interest. Nor anyone from getting rid of their Tesla stock, should they disagree with the majority of their fellow owners, over exactly who is best qualified to hold each job.

      Getting the government involved, is never the best option. No matter how much joy jealous children may get from watching other kids get reprimanded by daddy.

      • 0 avatar
        Lockstops

        Fraudulently screwing owners and other stakeholders out of billions is not a small little thing. Free countries have justice systems.

        If Tesla = Musk (Musk has majority control) then there needs to be something other than Tesla’s discretion on such matters.

        • 0 avatar
          stuki

          Noone fraudulently screwed anyone out of anything. Musk tweeted something, for f’s sake. Something he, in his sleep deprived, stoned state may just have thought was true.

          The fact that idiots, lemmings and idiot lemmings decide to reorient their entire lives around a tweet, is the fault of them and them only.

          What counts as appropriate for government to exert some effort at protecting in civilized societies, is freedom of speech. Not freedom from consequences suffered from believing every piece of drivel some hack may be able to sorta-kinda formulate in a tweet before passing out after a pill bender.

          If Musk has majority control of Tesla, those who don’t trust the guy blindly, or are at a minimum willing to take a risk on the guy, shouldn’t expose themselves to Musk’s actions. I know of up to several people who, “wow! amazing,” don’t own Tesla stock!! But who are now stuck paying for tax feeding and ambulance chasing deadweight serving those dumb enough to do so without understanding the risks it exposes them to.

      • 0 avatar
        civicjohn

        @ stuki, you’re getting way too angry. EM took the punishment and they shall move forward.

        As I’ve said in other posts, the current board consists of family and others that have never been on an automotive board in their lives. They do it because the $1.533 million annual checks come in quite handy.

        Surely you aren’t going to say that the Solar City purchase was the best move Tesla could make, maybe you think that’s a good old fashioned to cover the family ass. I think there are thousands that would not agree with you srongly but they are held back to try to bail out if the company goes private. Heck, Panasonic is selling solar panels to anyone from GF2 if they can. Testa can’t buy them!!

        The board payments are absurd, the board is too tightly knit, this is probably the best decision he has made in years, and I don’t think he came to this conclusion on is own. Maybe he did, more power to him if that was the case.

        I can’t believe you wrote this “In free countries, where enterprises are not state owned and/or controlled, exactly what qualifications is desired for some job, is up to the enterprise’s owners”, er, no.

        As a member of 3 boards, they exist to stop this kind of lunacy, but they are getting WAY ABOVE the compensation that other automative boards get (help me here, but I think they are supposed to be overseeing the actions of the CEO.

        Heck, maybe I’m crazy, but I am damn sure they enjoy the compensation, which may be reduced, and should be.

        Either way, the board has to be cleansed, the payments to board members need to come down, do try at some level to mimic your peers.

        If you agree that EM needs his title, considering that he owns 20+ of the Tesla stock and has been borrowing from those stocks in a very heavy way is a very good thing, then you need to dig a little deeper.

        • 0 avatar
          stuki

          In free countries, if you don’t like how a company is being run, how it’s employees and/or directors are compensated, nor whether some of the above are related to each other or not, don’t join them. Don’t work there, don’t buy stock, and don’t lend them money. There are plenty of people in the world with no exposure to Tesla. It ain’t hard.

  • avatar
    EBFlex

    He will still be too close to the company and will continue to do damage.

    He should have no more influence on Tesla than myself or anyone here. He is a cancer and this smacks of treating the symptoms rather than the cause.

    • 0 avatar
      stuki

      Who should, and should not, have influence over the companies they start, should always be up to ambulance chasers, tax feeders, and a peanut gallery of well indoctrinated nothings mindlessly cheering the former on.

      • 0 avatar
        rev0lver

        Musk didn’t start Tesla. Maybe get your facts straight before attacking those you disagree with.

        • 0 avatar
          stuki

          OK. Exchange “start” for “own.” Or “run.”

          But of course, some dude commenting on the internet getting the most minute details of Tesla’s early history just a bit wrong;
          is definitely proof we need ambulance chasers, tax feeders, and a peanut gallery of well indoctrinated nothings mindlessly cheering the former on, to have as much influence over other people’s companies as possible.

          • 0 avatar
            rev0lver

            Nope. Doesn’t prove any of those things. Just shows that you talk about things that you’re not informed about.

  • avatar
    ScarecrowRepair

    A blessing in disguise for Elon AND the company. He is, after all, the genius / devil behind the company; it wouldn’t exist without his drive and ability to inspire people. Losing the COB role still leaves him as CEO. If he’d been kicked out entirely, the company would be just another company, and probably tank or at least turn into a boring company with boring plans and boring products.

  • avatar
    MBella

    Not to say that what he did wasn’t stupid, but is this really at the top of the SEC’s priorities? In a period of time where banksters and brokers pretty much defraud the country daily, the SEC is worried about Musk’s stupid tweets.

    • 0 avatar
      Art Vandelay

      Because they are doing this does not mean they are devoting 100 percent of their resources to it and ignoring other priorities. But yes they should be doing this because this sort of thing is 100 percent their job.

    • 0 avatar
      JohnTaurus

      Why do cops arrest wife beaters and drug pushers when there are more serious crimes being committed?

      Makes just as much sense. Let someone get away with beating their spouse and they eventually kill them. Let someone get away with selling heroin to kids and it eventually kills one or more.

      Let Musk get away with irresponsible acts like this, and he eventually does something far worse that impacts far more people. Besides, you wouldn’t be so nonchalant about it if you were financially hurt by his misinformation. The monetary settlement will be distributed to those who actually were. What else is the SEC for but to curtail acts like this?

      • 0 avatar
        MBella

        I think most people would agree that those are actually serious offenses. Speeding would have been a better comparison. This while you were aware several murderers in your jurisdiction didn’t get charged a few years ago because they were friends with the police. In the grand scheme of things, Elon’s tweet didn’t change much. The stock price blipped that day and went back to normal a few days later. In the meantime all the brokers who basically defrauded the whole country are living the high Life courtesy of free money from the FED and bailout packages.

    • 0 avatar
      stuki

      A central pillar in the official program of empowering banksters and brokers to defraud the country, is to put up a facade indicating that “investing,” in the abstract, is some form of useful activity, and that it is something those designated as mooches should feel protected by in wasting their lives on.

      That way, they mooches will 1) Continue anteing up for games where the Banksters and brokers are playing with a legally and systemically guaranteed, always increasing, edge. And 2) keep falling for the scam that the reason the Banksters and Brokers are richer than they are, is because they are somehow “smarter.” At “inveeesting,” or some other Newspeakian pseudo-economic abomination. So that the designated mooches should defer to them, and be happy to be led by their betters.

      The scam seems to work so far; so I can see why its beneficiaries keep running it.

    • 0 avatar
      civicjohn

      @MBella,

      he made serious mistakes with respect to SEC regulators. Maybe a call to your broker will enlighten you.

  • avatar
    kurkosdr

    Well, this should teach CEOs that Twitter messages are to be treated more like a telegram message that will be posted on the town square and less like a friendly conversation with their drinking buddies down at the pub…

    • 0 avatar
      stuki

      The government restricting free speech is good! This will teach people to speak their mind without consulting $100K worth of ambulance chasers and PR hacks first, darnit!! We need to be tough on those free speakers!!

      • 0 avatar
        Astigmatism

        Yes, laws against securities fraud restrict free speech. So do laws against libel, child pornography, and scamming consumers generally. This comes as news to you?

        • 0 avatar
          rev0lver

          Get away from my freeze peach!

        • 0 avatar
          stuki

          No. But that doesn’t make such arbitrarily enforced restrictions any more compatible with free societies.

          They do, like all arbitrary restrictions on freedom, provide cover for those who fancy themselves rulers to pick and choose exactly who, among everyone who have ever been wrong about something, they decide to harass, though. Which, along with providing diversionary entertainment for their well indoctrinated underlings, is their entire raison d’etre.

      • 0 avatar
        jpolicke

        Free speech has never been absolute. Threats and incitements to violence are not protected, neither is libel and defamation of character. I want the designated government agency tasked with overseeing the stock market to crack down on people making irresponsible statements bordering on fraud. Musk thinks he can say anything he pulls out of his butt because he’s Elon the Virtuous Visionary. He’s going to get a second lesson on the limitations of free speech when the defamation suit from the diver in Thailand hits the court.

        • 0 avatar
          stuki

          Until absolutely everyone who has ever called someone something less-than-nice, or muttered he’s going to kick someone’s rear, or have been wrong about whether he’ll at some point come across a few bucks, are automatically given the same treatment; all you’re doing is falling all over yourself justifying completely arbitrary persecution and harassment at the behest of those most closely connected to the tax feeding and ambulance chasing cliques that have bled the West dry of any redeeming qualities.

          If some dude in California mindlessly babbles about how some other dude in Thailand is mean, who cares? It’s noise emanating from a whole in someone’s head. That’s it. Nothing for anyone to pay even the slightest attention to.

      • 0 avatar
        SC5door

        If he doesn’t want to be held accountable for tweets about the business then figure out how to take the company private without announcing it. Otherwise he violated an SEC rule. What don’t you understand?

        § 240.14e-8 Prohibited conduct in connection with pre-commencement communications.

        It is a fraudulent, deceptive or manipulative act or practice within the meaning of section 14(e) of the Act ( 15 U.S.C. 78n) for any person to publicly announce that the person (or a party on whose behalf the person is acting) plans to make a tender offer that has not yet been commenced, if the person:

        (a) Is making the announcement of a potential tender offer without the intention to commence the offer within a reasonable time and complete the offer;

        (b) Intends, directly or indirectly, for the announcement to manipulate the market price of the stock of the bidder or subject company; or

        (c) Does not have the reasonable belief that the person will have the means to purchase securities to complete the offer

  • avatar
    vent-L-8

    I just hope this isn’t going to be like when Steve Jobs left Apple and it all went off the rails

    • 0 avatar
      Art Vandelay

      He isn’t totally exiled from the company like Jobs was. Also, I would argue that Jobs’ initial departure from Apple was the best thing to happen to both him and Apple in light of how his return went down.

  • avatar
    SCE to AUX

    Good news. Tesla will do better now. I’d bet TSLA goes up on Monday, particularly after news of its record Q3 comes out.

    • 0 avatar
      mcs

      I agree, they will do better. I wonder if they could pull John Krafcik away from waymo? He knows his way around Fremont from his NUMMI days.

    • 0 avatar
      stuki

      All companies do better once governments and apparatchiks get more involved in hiring and firing decisions. Tesla’s autopilot will certainly stop crashing now. Their range improve, and their battery costs should drop like a rock.

  • avatar
    Middle-Aged (Ex-Miata) Man

    “[Muskrat] must step down from the chairman role within 45 days, but he will remain CEO…”

    I wonder how long it’ll take the board that Elon is no longer part of to oust him from that role.

  • avatar
    Robbie

    It seems a very mild punishment for stock price manipulation.

  • avatar
    APaGttH

    So he is no longer chairman, but does he hold a board seat? It’s an important question – if he no longer holds a seat on the board, it’s easier to vote him out of the company if the activist investors wanted to stage a coup.

  • avatar
    Big Al from Oz

    Elon got away with this one. I’d say he will eventually be forced away from Tesla. Tesla might need him to hang around for a handover/takeover.

    We’ll know his intentions or his position by the amount of Space Ex stories and pie in the sky predictions and promises from Elon.

  • avatar
    Asdf

    It’s incredible that Musk is allowed to stay at Tesla at all. He’s a guy who is so incompetent that despite all the nonsense about Tesla being a “disruptive” company, under Musk’s reign the company hasn’t even been able to take care of such basic things as making an EV that may be fully charged in the same time it takes to fill a fuel tank! And this after being in business for FIFTEEN WHOLE YEARS! Musk needs to go, and Tesla needs to be closed down permanently if the charging problem is not addressed immediately by the new chairman.

  • avatar

    They deal had to be done. The board needs Elon to get the share price back up which will occur when the good quarter results are announced. Of course the fact that it will be another all hands on deck all pumped up result (seen the Bloomberg Tesla production tracker recently?) will get them in the position to raise the additional funds thst Elon has said are not needed while valuations are high. Company is still on track to be bankrupt or sold within 24 months. Probably both in that order

    • 0 avatar
      Lockstops

      Yeah, if you’re buying Tesla stock with the motivation of wanting to actually own a part of the company then stop buying Tesla stock. Tesla stocks won’t mean ownership of the company for long, with the current debt level it doesn’t really mean that even today. Buy stocks of Tesla’s creditors instead. They already de facto own Tesla.

  • avatar
    notapreppie

    He’s a man of vision that achieved a lot but it seems like he’s on a downward spiral, wallowing in his own reality distortion field.

    Maybe this will be the ego deflation he needs to right his own ship.


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