Tesla chief Elon Musk's SEC settlement: What experts are saying

Eileen GuzmanOct 02, 2018

The news of Tesla CEO Elon Musk settling with US financial regulators sent the company's stock soaring Monday morning. In the settlement, Elon Musk is to pay a $20 million fine and Tesla will also pay a similar amount separately, totalling the fines to $40 million.

But the claim on August 7 that he had the funding to take Tesla private, and a subsequent U-turn, stunned Wall Street and came amid public appearances which saw Musk smoke marijuana live on a radio show and call a British diver in the Thai cave rescue a "pedo". "Funding secured." Later on, the SEC ruled that Musk never went through with his declaration and deal between the company and the Saudi sovereign wealth fund set to foot the bill on the buyout.

The tweet suggested Musk would take Tesla off the stock market.

As of Friday afternoon, Tesla's stock price dropped by 14 percent to $264.77, erasing $7.3 billion in shareholder value.

Tesla shares plunged as a result.

"I expect the stock to trade materially higher on this and into the quarter where we can focus on the fundamentals". Musk will be able to continue as CEO, but the SEC's aim is to give Tesla's board more independence from Musk-and hence to subject Musk to more vigorous oversight. With products like the Model S, Model X and, even with its production woes, the Model 3, it's easy to see why. Tesla is due to appoint two new independent directors, with the board expected to oversee Musk's communications with investors. Additionally, Musk will be ineligible to be re-elected as chairman for three years. Further, the fine amounts would be distributed to investors affected under a court approved process. 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.

Likewise, Tesla will pay another $20 million due to its failure to check whether Musk's announcements complied with the law. "At the same time, there will be appropriate restraints in place".

The complaint "alleges that Musk violated antifraud provisions of the federal securities laws, and seeks a permanent injunction, disgorgement, civil penalties, and a bar prohibiting Musk from serving as an officer or director of a public company", the SEC said on Thursday when it filed the complaint at court.

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