Embattled Tesla CEO Elon Musk has reached a settlement with the SEC over his misleading tweets about taking the company private, CNBC reports. Musk and Tesla will each pay a $20 million fine—about one tenth of one percent of Musk’s nearly $20 billion fortune—and Musk will step down as chairman of the company’s board for at least three years, while retaining his position as CEO. Tesla will also be required to appoint two new independent directors to its board and undergo additional changes to its corporate governance. The settlement still requires court approval.
Musk’s troubles with the SEC began after an August 7 tweet suggested he was taking Tesla private at the 420-friendly share price of $420.
Musk’s tweet sparked an immediate surge in Tesla’s share price based on the above-market price in the tweet, Musk’s assertion that he had secured funding, and some similarly optimistic follow-up tweets. But the SEC alleged in its complaint that these were all pipe dreams:
When he made these statements, Musk knew that he had never discussed a going-private transaction at $420 per share with any potential funding source, had done nothing to investigate whether it would be possible for all current investors to remain with Tesla as a private company via a “special purpose fund,” and had not confirmed support of Tesla’s investors for a potential going-private transaction. He also knew that he had not satisfied numerous additional contingencies, the resolution of which was highly uncertain, when he unequivocally declared, “Only reason why this is not certain is that it’s contingent on a shareholder vote.”
Whoops! The SEC had been investigating and negotiating with Musk for some time, but filed suit Thursday when a provisional settlement fell through. Tesla stock closed at $264 on Friday, a steep drop from the $389.61 price it hit in the immediate aftermath of Musk’s tweet. The SEC says that they expect Tesla’s board to “oversee” Musk’s public communications in the future, in the hopes of insulating Tesla shareholders—and perhaps, expatriate scuba-divers—from the consequences of Musk’s sometimes ill-advised tweets, podcast appearances, and weekend invitations to Azealia Banks.