Tesla CEO Elon Musk Officially Settles with the SEC for Misleading the Public

author: Eric Walz   

On August 7, Tesla CEO Elon Musk tweeted about taking Tesla private at $420 per share, adding that he secured the necessary funding to do so. The surprising tweet caused Tesla's share price to rise quickly, before dropping nearly 30 percent. Musk's tweet sparked an investigation by the U.S. Securities and Exchange Commission (SEC) and various lawsuits by shareholders. Now the case is officially settled, after approval by the court.

A U.S. judge approved Tesla's and Chief Executive Elon Musk's $40 million settlement with the U.S. Securities and Exchange Commission, resolving government claims that Musk misled the public with a number of tweets about plans to take the automaker private.

U.S. District Judge Alison Nathan in Manhattan officially signed off on the accord on Tuesday after Tesla, Musk and the regulatory agency said in a joint filing that the deal was in the best interest of Tesla investors. As retribution, Tesla will pay $20 million and Musk will pay $20 million. In addition, Musk must also step down as chairman of Tesla, although he will remain the company's CEO.

The judge's decision was largely expected, even after Musk retaliated by insulting the SEC's decision in a series of tweets just a few days after reaching the deal.

Days after of the settlement agreement, Musk shot off a tweet referring to the SEC as the "Short Seller Enrichment Commission" and sarcastically praising the regulator's work. Experts said the tweet could be viewed, problematically, as a denial of wrongdoing by Musk, but they said it wasn't likely to derail the deal.

After Musk tweeted that "funding secured" to take Tesla private on August 7, shares surged as much as 13 percent resulting in a temporary halt on Wall Street. After questions began to swirl around the truthfulness of Musk's claims, Tesla share price fell nearly 30 percent in the weeks after. The SEC quickly opened an investigation by questioning Musk, Tesla's board and other executives.

It was first reported that Musk threatened to step down as CEO of Tesla if its board forced him to accept the SEC's settlement, but he apparently reversed course and agreed to resolve the allegations.

Musk and Tesla agreed to resolve the SEC probe without admitting or denying wrongdoing. The plan called for their combined $40 million in penalties to be distributed to harmed shareholders through a court-approved process, the SEC has said. The deal also calls for a new chairman to be appointed, and the naming of two new independent directors.

The Tesla Model 3

Tesla Getting Back to Building Cars

The ruling allows Tesla to put this distraction behind it and get back to building cars. The electric automaker is steadily increasing the number of Model 3's it's building each week. The Model 3 sedan has already become one of the top-selling cars in the U.S. market and the car is important for Tesla to finally achieve profitability.

Bloomberg reports that weekly production of the Model 3 has been on the rise and is averaging around 4,258. The total number of Model 3's built so far reached an important milestone of 100,000 cars last week, according to Bloomberg's Tesla tracker.

Tesla received over 450,000 reservations for its first mass-market electric car since the company began taking deposits on March, 31 2016. The electric sedan starts at $35,000 for the standard version. However, the lower priced version is not yet available, as Tesla is building the more expensive, long-range and performance versions of the Model 3 first. Customers who want the standard range battery can order a higher-priced version of the car or wait for the lower priced version to become available.

Musk said the base version of the Model 3 will being production in early 2019.

Eric Walz

Originally hailing from New Jersey, Eric is a automotive & technology reporter covering the high-tech industry here in Silicon Valley. He has over 15 years of automotive experience and a bachelors degree in computer science. These skills, combined with technical writing and news reporting, allows him to fully understand and identify new and innovative technologies in the auto industry and beyond. He has worked at Uber on self-driving cars and as a technical writer, helping people to understand and work with technology.