Days after it became public that Elon Musk was being sued by the Securities and Exchange Commission for alleged fraud over the infamous “funding secured” tweet this summer, he and Tesla has reached a settlement that will keep him CEO—but will cost him his board chairman title.
According to CNBC and multiple other reports, the settlement requires Musk and Tesla to each pay a $20 million civil fine. Musk will relinquish his board chairmanship within 45 days and cannot serve in that role for three years. Additionally, Tesla must appoint two new independent directors to the board, according to reports.
Musk was accused of making “false and misleading” statements with the tweet that claimed he had funding to take Tesla private—a claim that was later disproven—and of not properly notifying regulators of his actions.
From the SEC, in a statement:
“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 agency said in a statement.
“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.”
Indeed, the settlement terms will likely be seen as installing checks on Musk’s power. While the board seemed to want Musk to stop tweeting back in August during his war of words with a Thai cave rescuer whom he accused of being a pedophile—a claim that later resulted in a lawsuit—it never did anything to enforce this, and in recent days has backed him amid the fraud allegations.
At the same time it keeps the man widely viewed as a visionary, revolutionary leader and thinker in charge of Tesla and its future. Much of Tesla’s valuation is directly tied up in having Musk as the CEO of the company. Without him at the helm, prevailing wisdom as that the electric automaker would have had a difficult time raising capital at a time when funds are badly needed.
To recap: according to the SEC’s investigation, Musk tweeted he had “funding secured” to take Tesla private after he had early, verbal discussions with the Saudi Arabian sovereign wealth fund for a large investment. That agreement was never formalized, and on Aug. 2 Musk took the nonexistent “offer” to his board before publishing his tweet a few days later—but didn’t consult them about said tweet. He also told investigators he set the per-share price at $420 to impress his then-girlfriend, the musician Grimes, who’s credited with getting him into marijuana.
Eventually the claim blew up in Musk’s face as it was realized by all involved that no such formal offer existed, and the SEC went after him for alleged “false and misleading statements and material omissions” that harmed investors.
Is $40 million the most expensive tweet of all time? Perhaps.
A copy of the settlement was obtained by this Twitter account and can be read below:
This is a breaking news story and is being updated.