Elon Musk Relinquishes Position as Chairman of Tesla Following Fraud Charges

Peyton Upchurch
Staff Writer

Copy of News_Peyton_musk_Wikimedia Commons, Maurizio Pesce.jpg

PC: Maurizio Pesce

The Securities and Exchange Commission (SEC) has sued Tesla co-founder and chairman Elon Musk last month in the wake of fraud charges, and the two parties recently reached a settlement.

Following a deceitful message from Musk to Tesla, Inc. investors, a set of charges brought upon him by the United States has forced the Tesla executive to step down from his position in addition to paying a $20 million penalty as part of the settlement.

Musk tweeted an assertion in early August that he had secured funding from investors that would allow Tesla to buy out stockholders at $420 per share and take the company private. Yet, it was quickly revealed that the claims were fictitious, and Musk had just picked the number to impress his girlfriend. The SEC quickly sued Musk over his false claims.

The settlement was reached quickly; only two days had passed from the time Musk was charged with misleading investors with fraudulent information about the future of the company, and the time that the Securities and Exchange Commission reached an agreement with Tesla.

The resolution also requires that the company elect two new directors and institute a board comprised of independent members. Tesla has been criticized prior to the events of the past several months for having a lenient administration and for lacking organization, but the company’s shareholders vetoed a proposal to establish an independent board. They instead favored the reelection of the three existing directors.

Although Tesla, Inc. and Musk himself have refused to admit any fault in the fraud accusations, the lawsuit requires Musk to resign from his position as chairman within the next 45 days. He will not be eligible for reelection to the position for at least three years following his resignation. However, he will be permitted to retain his position as chief executive officer and will remain on the corporation’s board.

This settlement poses tension for the future of Tesla. The company’s shares plunged fourteen percent last week, which is the largest decline they have seen in several years. Musk has spent previous years fashioning the company into one of the most valuable automotive producers in the world, and the coming years hold uncertainty without him as the chairman.

However, investment analyst Ben Kallo remains positive about the potential impact of the situation, saying that the settlement is a “good resolution for Tesla stakeholders.” The Enforcement Division of the SEC has stated that the resolution is intended to protect the interests of Tesla shareholders and prevent any further issues similar to Musk’s recent episodes.

Kallo believes that the SEC’s concerns have produced a positive outcome and that their claims were genuinely filed in the name of stakeholder protection. He expects the stock to “trade materially higher” and hopes that this is an opportunity for Tesla to “focus on the fundamentals.”

Ultimately, Tesla shareholders will be able to take comfort in the fact that their interests are being protected by necessary guidelines, but that Musk will remain in a position of power within the company, which is expected to function as usual.

Categories: News

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