Washington/San Francisco: Tesla and Elon Musk will step down as the company’s chairman but will remain as chief executive, under a settlement that caps a tumultuous two months for the car-maker.
The billionaire have agreed to pay a $20 million penalty to settle fraud charges brought by the U.S. over his claims about taking the company private.
The securities fraud agreement, announced by the Securities and Exchange Commission (SEC) on Saturday, will come as a relief to investors, who had worried that a lengthy legal fight would only further hurt the loss-making electric car company.
The SEC said Musk, 47, misled investors with tweets on August 7 in which he said he was considering taking Tesla private and had secured funding.
The regulator had alleged in a lawsuit on Thursday that the tweets had no basis in fact, and said the market chaos that ensued hurt investors.
The SEC charges against Musk on Friday shaved about $7 billion off high-flying Tesla, knocking its market value to $45.2 billion on Friday, below General Motors Co’s $47.5 billion.
In the settlement, the agency pulled back from its demand that Musk, who is synonymous with the Tesla brand, be barred from running Tesla, a sanction that many investors said would be disastrous.
“I think this is the best possible outcome for everyone involved” said Ivan Feinseth of Tigress Financial Partners, who rates Tesla ‘neutral’, who added the SEC’s penalty was only a slap on the wrist for Musk.
“The fact that he can remain CEO is very important for the company.”
Neither Musk nor Tesla admitted or denied the SEC’s findings as part of the settlement. Tesla and Musk did not immediately respond to requests for comment.
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