Quantcast
Connect with us

Musk to resign as Tesla chairman, remain as CEO in SEC settlement

Published

on

Tesla Inc and Elon Musk have agreed to pay $20 million each to financial regulators and the billionaire will step down as the company’s chairman but remain as chief executive, under a settlement that caps a tumultuous two months for the carmaker.

The securities fraud agreement, disclosed by the U.S. Securities and Exchange Commission on Saturday, will come as a relief to investors, who had worried that a lengthy legal fight would only further hurt the loss-making electric car company.

The SEC on Thursday charged Musk, 47, with misleading investors with tweets on Aug. 7 that said he was considering taking Tesla private at $420 a share and had secured funding. The tweets had no basis in fact, and the ensuring market chaos hurt investors, it claimed.

Investors and corporate governance experts said the agreement could strengthen Tesla, which has been bruised by Musk’s recent behavior, which included smoking marijuana and wielding a sword on a webcast, and attacking a British rescue diver via Twitter.

The settlement should place more oversight on Musk while not taking the “devastating” measure of forcing him out, said Steven Heim, a director at Boston Common Asset Management, which owns shares in Tesla battery maker Panasonic Corp.

ADVERTISEMENT

Tesla must appoint an independent chairman, two independent directors, and a board committee to set controls over Musk’s communications under the proposed agreement.

“The prompt resolution of this matter on the agreed terms is in the best interests of our markets and our investors, including the shareholders of Tesla,” SEC Chairman Jay Clayton said in a statement.

Thursday’s charges shaved about $7 billion off high-flying Tesla, knocking its market value to $45.2 billion on Friday, below General Motors Co’s $47.5 billion.

ADVERTISEMENT

In the settlement, the agency pulled back from its demand that Musk, who is synonymous with the Tesla brand, be barred from running Tesla, a sanction that many investors said would be disastrous.

“I think this is the best possible outcome for everyone involved” said Ivan Feinseth of Tigress Financial Partners, who rates Tesla “neutral” and who called the SEC’s penalty “a slap on the wrist” for Musk.

“The fact that he can remain CEO is very important for the company.”

ADVERTISEMENT

Neither Musk nor Tesla admitted or denied the SEC’s findings as part of the settlement, which still must be approved by a court. Tesla and Musk did not immediately respond to requests for comment.

HUNT FOR A STRONG CHAIR?

Musk had been directly involved in almost every detail of Tesla’s product design and technology strategy, and drove the company’s employees to extraordinary achievements – much as another Silicon Valley chief executive, Steve Jobs, did at Apple Inc.

The entrepreneur is now required to step down as chairman of Tesla within 45 days, and he is not permitted to be re-elected to the post for three years.

ADVERTISEMENT

The SEC charged Tesla with failing to have required disclosure controls and procedures for Musk’s tweets. The SEC said the company had no way to determine if his tweets contained information that must be disclosed in corporate filings, or if they contained complete and accurate information.

Musk walked away at the last minute from an earlier settlement with the SEC that would have required him to give up key leadership roles at the company for two years and pay a nominal fine, according to media reports on Friday. Reuters on Friday reported that Musk could settle with the SEC but was ready for a court fight.

Investors said on Friday that it has been a mistake for Musk to turn down that settlement, especially at a time when the company has been pushing hard to meet aggressive production targets for its Model 3 sedan.

ADVERTISEMENT

The settlement tasks the Tesla board, which critics have accused of failing to rein in Musk, with the tricky challenge of finding an independent chairman able to work closely with the sometimes unpredictable chief executive.

It was not immediately clear who would be appointed to the role. Antonio Gracias, the current lead independent director and CEO of Valor Equity Partners, has been criticized as being too close to Musk and his companies.

“The question is whether Musk’s buddies on the board decide to bring in a really strong chair who will stand up to Musk,” said Erik Gordon, a University of Michigan business professor who follows corporate governance.

ADVERTISEMENT

Musk has driven the company to the verge of profitability with a costly ramp-up of production of its Model 3 over the past year. Electric vehicle news site Electrek reported that Tesla had produced 51,000 Model 3s with a couple of days left in the quarter, hitting its goal of 50,000 to 55,000.

The CEO, who has often turned to Twitter to promote Tesla and confront critics, said on Thursday that the SEC’s actions were unjustified. Tesla shares jumped after his Aug. 7 tweets, a blow to short-sellers betting on the stock’s decline.

As the public face of Tesla, Musk had gained legions of fans for his bold approach to business and technology. He used his Twitter account to promote the achievements of Tesla, his rocket launch company SpaceX, and other projects such as his tunnel venture, the Boring Co, to his nearly 23 million followers.


Report typos and corrections to [email protected].
READ COMMENTS - JOIN THE DISCUSSION
Continue Reading

Breaking Banner

House of Representatives votes for resolution condemning President Donald Trump’s racism

Published

on

President Donald Trump was condemned by the House of Representatives on Tuesday for his racist attacks on young women of color in Congress.

The resolution was passed with the support of every Democrat. The final vote was 240-187.

The text said "Trump’s racist comments have legitimized fear and hatred of new Americans and people of color."

The resolved that the body "strongly condemns President Donald Trump’s racist comments that have legitimized and increased fear and hatred of new Americans and people of color by saying that our fellow Americans who are immigrants, and those who may look to the President like immigrants, should “go back” to other countries, by referring to immigrants and asylum seekers as “invaders,” and by saying that Members of Congress who are immigrants (or those of our colleagues who are wrongly assumed to be immigrants) do not belong in Congress or in the United States of America."

Continue Reading

Facebook

Legendary civil rights icon John Lewis unloads on Trump from the House floor: ‘I know racism when I see it’

Published

on

Civil rights leader Rep. John Lewis (D-GA) took to the floor of the House of Representatives to condemn racist statements by President Donald Trump.

As chair of the Student Nonviolent Coordinating Committee, Lewis was one of the "Big Six" civil rights leaders who organized the 1963 March on Washington during with the Rev. Dr. Martin Luther King, Jr. gave his famous "I have a dream" speech.

"I rise with a sense of righteous indignation to support this resolution," Lewis began.

"I know racism when I see it. I know racism when I feel it," he explained. "And at the highest level of government, there’s no room for racism."

Continue Reading
 

Facebook

US withholds cash from UN Population Fund over China abortions

Published

on

The United States said Tuesday it will again withhold contributions to the UN Population Fund due to its work with China, which controls family size, as the agency accused Washington of jeopardizing women's health.

It marked the third straight year that the United States has refused to fund the UN body as President Donald Trump's administration seeks to combat abortion, a pivotal issue for his evangelical Christian base.

Secretary of State Mike Pompeo determined that "China's family planning policies still involve the use of coercive abortion and involuntary sterilization practices," conditions that under US law require an end to funding, a State Department spokeswoman said.

Continue Reading
 
 
 

Copyright © 2019 Raw Story Media, Inc. PO Box 21050, Washington, D.C. 20009 | Masthead | Privacy Policy | For corrections or concerns, please email [email protected]

close-image