It has come as a shocker to see Elon Musk being accused of fraud by The Securities and Exchange Commision (SEC). The CEO and Chairman of Tesla Inc., which is based in Silicon Valley have agreed to settle the charge brought unto him once and for all. It is important to notice that the charge is a week old, so Musk took his time about the decision.
Tesla has also been accused of failing to require disclosure controls and procedures that were related to Musk tweeting on social media. These charges were also put forward by the SEC and Tesla has agreed to settle them immediately. Unfortunately for many of Elon Musk’s fans, Tesla has decided that it will be very firm in its decision to counter these allegations. Sadly Elon Musk will be removed as Chairman of the Tesla board and will be required to pay an agreed sum of money as financial penalties.
All of these problems for Tesla started that Musk tweeted on August 7, 2018, that he was able to make Tesla private at $420 a share, which was ways off the price that the company had for its shares a the time. According to the SEC, Musk also confirmed that the transaction had been secured and the only thing remaining was a shareholder vote. The SEC is accusing Musk of fraud because they believe that he was aware of the transaction’s uncertainty and still decided to disclose the information to the public. It is also stated that Musk did not conduct any type of consultancy with his advisors and directors board in regards to the price and deal terms, therefore making his statement unfactual and false. According to the SEC Musk’s tweet managed to boost Tesla’s stock price by more than 6% and made disruptions in the market.
Even though it was clearly mentioned by Tesla in 2013 that the market was able to access any type of information about the company from Elon Musk’s tweets, the SEC is still fighting the case saying that Tesla had absolutely no disclosure control over the tweets that its CEO made. The company is accused of having no control over the fact whether Musk’s tweets had information in them that needed to be disclosed in Tesla’s SEC filing. It also had no verification of the accuracy of the disclosed information.
Many fans and investors will be delighted to find out that the charges are going to be settled without Musk and Tesla admitting or denying the SEC’s allegations. The settlement will include:
- The stepping down of Musk as the Chairman of Tesla. He will be replaced by an independent Chairman and have no rights to the position for the coming 3 years.
- Additional boards and procedures will be implemented by Tesla in order to better control Elon Musk’s actions with his social media account. They will also establish a new committee of independent directors.
- 2 new independent directors will be appointed to its board.
- In total $40 million will be paid by Musk and Tesla in order to reimburse harmed investors.