Tesla, Elon Musk, and the SEC have jointly filed court papers seeking approval for a settlement related to Musk’s “funding secured” tweet.
“The parties believe that resolution of these cases consistent with the proposed settlement terms is in the best interest of investors, including Tesla shareholders,” the filing says. “We
therefore respectfully submit that the Court should accept and enter the proposed consent
judgments.”
Under the terms:
- Musk will step down as Tesla’s Chairman and be replaced by an independent Chairman.
- Musk will be ineligible to be re-elected Chairman for three years;
- Tesla will appoint a total of two new independent directors to its board;
- Tesla will establish a new committee of independent directors and put in place additional controls and procedures to oversee Musk’s communications;
- Musk and Tesla will each pay a separate $20 million penalty. The $40 million in penalties will be distributed to harmed investors under a court-approved process.
According to the SEC’s complaint against him, Musk tweeted on August 7, 2018 that he could take Tesla private at $420 per share, that funding for the transaction had been secured, and that the only remaining uncertainty was a shareholder vote. The SEC’s complaint alleged that, in truth, Musk knew that the potential transaction was uncertain and subject to numerous contingencies. According to the SEC’s complaint, Musk’s misleading tweets caused Tesla’s stock price to jump by over six percent on August 7, and led to significant market disruption.