Elon Musk Steps Down as Tesla Chairman After SEC Fraud Charges

The charges stem from Musk's tweet claiming he had "funding secured" to take the automaker private at $420 a share.

image
R&T

Elon Musk has officially stepped down as chairman of Tesla Motors as part of a settlement with the US Securities and Exchange Commission, . He will maintain his role as CEO of the electric carmaker.

The SEC brought securities fraud charges against Musk and Tesla last week, in response to Musk's ill-advised August 7 tweet claiming he had "funding secured" to take the automaker private at a share price of $420. , Musk "knew that the potential transaction was uncertain and subject to numerous contingencies," and the Tesla chairman and CEO 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."

Am considering taking Tesla private at $420. Funding secured.

— Elon Musk (@elonmusk)

, the $420 share price was significantly higher than current trading prices of Tesla stock. Musk later admitted he had calculated the share price based on a 20-percent premium over trading prices at the time—and according to court documents, Musk rounded the resulting number 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.' "

The SEC says Musk's "funding secured" tweet caused Tesla stock prices to rise by more than six percent that day, with prices falling dramatically after the agency's actions against Musk were announced.

As part of the settlement with the SEC, Musk has agreed t0 resign his post as Chairman of the Tesla board within the next 45 days; he will be ineligible for re-election as Chairman for three years. He will remain CEO of the automaker, though both Musk and the Tesla company will each pay a $20 million fine, with the $40 million total to be "dispersed to harmed investors by a court-approved process." Tesla will appoint a new independent Chairman and two independent directors to its board, and will "establish a new committee of independent directors and put in place additional controls and procedures to oversee Musk’s communications."

When reached by Road & Track, a Tesla spokesperson did not provide comment regarding the settlement.
Advertisement - Continue Reading Below
More From New Cars