Musk steps down as Tesla chairman

TESLA Motors founder Elon Musk will stand down as chairman of the electric vehicle (EV) company, in the wake of a lawsuit from the US Securities and Exchange Commission (SEC) over tweets Musk made in August.

 

Mr Musk will remain on the Tesla board and will retain his position as CEO, but must vacate his position as chairman within 45 days.

 

The resignation comes as a consequence of tweets from Mr Musk on August 7, where he floated the idea of making Tesla a private company at $420 per share – a large premium over its price at the time. He also claimed that funding for the transaction had been secured, and a shareholder vote was the only remaining hurdle.

 

Following the tweet, the SEC levelled a lawsuit at Mr Musk claiming he knew there were still multiple processes to be worked out, and that his statements were not backed by facts.

 

The tweets caused Telsa’s stock price to jump by more than six per cent, leading to claims of market manipulation and disruption.

 

Last week the SEC brought its charges to Mr Musk, which has resulted in his resignation as chairman, in addition to a $US20 million ($A27.6m) fine for the misconduct.

 

In addition, Tesla Inc. has also agreed to settle a related charge from the SEC over failing to have in place disclosure controls and procedures related to Mr Musk’s tweet, and will also pay a $US20 million fine.

 

The $US40 million in fines will be distributed to investors harmed by the stock manipulation through a court-approved process. 

 

Musk will be replaced by an independent chairman, and will be ineligible to be re-elected to the role for three years.

 

Two new independent directors will also be appointed to the Tesla board, while a new panel of independent directors will be put in place, and additional controls and procedures will be implemented to oversee Mr Musk’s communications.

 

In finalising the settlement, the SEC withdrew its remand that Mr Musk be disallowed from running the company, a move seen by investors as being devastating for Tesla.

 

SEC Enforcement Division co-director Stephanie Avakian said the sanctions were designed to prevent instances like Mr Musk’s rogue tweet from happening again.

 

“The total package of remedies and relief announced today are specifically designed to address the misconduct at issue by strengthening Tesla’s corporate governance and oversight in order to protect investors,” she said.

 

Fellow SEC Enforcement Division co-director Steven Peikin added: “The resolution is intended to prevent further market disruption and harm to Tesla’s shareholders.”

 

Global Tesla sales have been climbing in 2018 with increased production of its Model 3 medium sedan, with Mr Musk predicting the brand will crack 100,000 quarterly sales for the first time.

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