Tesla founder and CEO Elon Musk will step down as chairman of the electric carmaker for at least three years as part of a settlement with the Securities and Exchange Commission over a security fraud charge stemming from a series of tweets that the SEC believes misled investors.
Musk and Tesla will also each pay $20 million fines as part of the settlement, but did not have to admit any wrongdoing related to the August 7 tweets that saw Musk allege that he had “funding secured” to take Tesla private at a per-share price that was well above its stock price at the time. The stock price subsequently skyrocketed before trading was halted and Tesla remains a public company.
If the penalties are approved by a judge, the total $40 million in fines will be paid out to investors who were “harmed” in the aftermath of the tweets. Tesla has also agreed to add two independent directors to its board as part of the pact.
For Musk, the result could be viewed as a win because he gets to remain Tesla CEO as part of the deal — an outcome that would not have been certain if the case had gone to trial. Whether it tames the famously mercurial entrepreneur is another question.