SAN FRANCISCO • Elon Musk (picture) will give up the role of Tesla Inc chairman and pay a US$20 million (RM82.8 million) penalty to settle fraud charges brought by the US over his claims about taking the company private.
Musk will get to keep his job as CEO and remain on the company’s board, but must resign as chairman within 45 days and can’t be re-elected to the role for three years as part of the accord reached on Saturday with the Securities and Exchange Commission (SEC). Tesla will also pay a US$20 million fine.
Neither Tesla nor Musk admitted wrongdoing under the settlement, which was reached two days after the regulator sued the billionaire over his tweeted claims to have had the funding and investor support to buy out stockholders at US$420 a share.
The deal eases uncertainty over Tesla’s future, while removing Musk from a key role at the automaker he’s led to become one of the most valuable in the world. The SEC’s lawsuit had sought to bar Musk from serving as an officer or director of a public company, a prospect that rattled investors. Tesla shares plummeted 14% last Friday, the biggest drop in almost five years.
“This is a good resolution for Tesla stakeholders,” Ben Kallo, an analyst at Robert W Baird & Co with the equivalent of a ‘Buy’ rating on the shares, said in an email. “I expect the stock to trade materially higher on this and into the quarter where we can focus on the fundamentals.”
Musk will purchase US$20 million worth of the company’s stock in the next trading opportunity, according to a person familiar with his plans. He’s Tesla’s largest shareholder, with a 20% stake.
The settlement requires that Tesla appoint two new independent directors and establish a committee of independent board members. Tesla had come under criticism for years prior to Musk’s take-private episode for lax governance, though shareholders sided with the board in June by voting against an independent chairman proposal and approving the re-election of three directors.
Steven Peikin, co-director of the SEC’s Enforcement Division said the resolution is intended to prevent further market disruption and harm to Tesla investors. — Bloomberg