Elon Musk will relinquish the role of Tesla Inc. chairman and split a $40 million penalty with the electric-car maker to settle fraud charges brought by the United States over his tweeted claims about taking the company private.
Musk, 47, will get to keep his job as CEO but must resign as chairman within 45 days and can’t be re-elected to the position for three years, the Securities and Exchange Commission said Saturday. Neither Tesla nor Musk admitted wrongdoing under the settlement, which was reached two days after the SEC sued the billionaire over his tweeted claims to have had the funding and investor support to buy out stockholders at $420 a share.
“As a result of the settlement, Elon Musk will no longer be Chairman of Tesla, Tesla’s board will adopt important reforms—including an obligation to oversee Musk’s communications with investors—and both will pay financial penalties,” Steven Peikin, co-director of the SEC’s Enforcement Division, said in a written statement. “The resolution is intended to prevent further market disruption and harm to Tesla’s shareholders.”
The settlement requires that Tesla appoint two new independent directors and establish a committee of independent board members. The company had come under criticism for years prior to Musk’s take-private episode for lax governance, though shareholders sided with the board in June by voting against an independent chairman measure and approved the reelection of two directors.
Tesla's stock has taken a pounding since the SEC filed the suit on Thursday.
“This is a good resolution for Tesla stakeholders,” Ben Kallo, an analyst at Robert W. Baird & Co., said in an email. “I expect the stock to trade materially higher on this and into the quarter where we can focus on the fundamentals.”