In an unexpected turn of events, Elon Musk has been asked to step down as the chairman of the electric automaker, Tesla within 45 days.
Apparently, Musk has made a deal over fraud charges, compelling him to resign as Chairman and pay a fine of $20 million fine. However, he will remain as CEO, US securities regulators said Saturday.
The agreement eases pressure on Tesla’s embattled CEO, who faced potentially being barred from serving as an officer or board member of a publicly traded company as a result of the charges, which stemmed from a tweet by Musk about taking the company private.
The Securities and Exchange Commission said in a statement:
“The settlements, which are subject to court approval, will result in comprehensive corporate governance and other reforms at Tesla — including Musk’s removal as chairman of the Tesla board — and the payment by Musk and Tesla of financial penalties” of $20 million each.
The SEC had charged Musk with securities fraud, alleging that he misled investors when he tweeted on August 7 that he had “funding secured” to privatize the electric automaker at $420 a share.
That caused a brief spike in Tesla’s share price, leading so-called short-sellers, who have been betting on the stock crashing for years, to lose millions.
The SEC said Musk’s statements on Twitter were “false and misleading” and that he had never discussed the plans with company officials or potential funders.
Musk said he later decided against the plan.
Two “independent directors” will also be appointed by Tesla, and the company will set up a new committee of independent directors and “put in place additional controls and procedures to oversee Musk’s communications,” the SEC said.
The $40 million in financial penalties “will be distributed to harmed investors under a court-approved process.”
Tesla’s shares plummeted around 14 percent on Friday over concerns about the company’s future after the announcement of the fraud charges against Musk.
Musk has baffled investors with emotional and seemingly erratic media appearances, including one where he appeared to smoke marijuana, and a public battle with a rescuer who helped save a group of boys trapped in a cave in Thailand, whom he termed a “pedo guy.”
Tesla is seeking to ramp up production of its Model 3, the mass-market vehicle seen as a key to the automaker’s future.
Stay tuned to Brandsynario for more updates.