Elon Musk settled with the SEC after the latter sued him and Tesla for misleading investors with his tweet on August 7, 2018: “Am considering taking Tesla private at $420. Funding secured.— Elon Musk (@elonmusk)”
As part of the settlement, Musk must step down as Tesla’s chairman for three years and pay $20 million in fines. Tesla must also pay an additional $20 million in fines and appoint two independent directors in addition to an independent chairman. If you asked Musk though, perhaps nothing has really changed. He was back to his usual antics, calling the SEC the “Shortseller Enrichment Commission” via Twitter on Friday.
A Quixotic crusade
Elon Musk’s crusade against short sellers has a long and storied history that reached an apex in August, when he considered taking Tesla public with help from a Saudi fund. The SEC initially offered Musk a better deal, asking him to step down as chairman for only two years and pay $10 million in fines. However, Musk urged Tesla to fight against the settlement, threatening to resign if Tesla settled. However, when the SEC sued the company on September 27, the board turned Musk’s mind around.
One of the main reasons that Musk didn’t want to settle was because he wanted to publicly state his innocence of the charges pursued by the SEC. With the settlement, Musk doesn’t have to admit guilt, but he can’t proclaim his innocence, either.
Legal experts opined that the fines levied against Musk are higher than any other CEOs have paid. However, other CEOs would also have been asked to step down in such a situation. The SEC may have thought that removing Musk would be bad for shareholders.
The settlement has relieved Tesla advocates. “This is a company people are actively investing in, both in the stock market but also in their own garage,” said Rebecca Lindland, an executive analyst at Kelley Blue Book. “So, it would have been damaging to a lot of people if the company had gone bankrupt or if this had gone on for years.”
Lindland was also positive about Tesla’s impending appointment of new directors. “It will provide some independent governance that Tesla is lacking right now as it grows and as it continues to develop as a company.”
Does Elon Musk love getting into trouble?
Musk courts trouble, criticizing analysts and the media as well as calling rescue divers pedophiles on Twitter. One former Tesla investor, who wished to remain unnamed, speculated that Musk enjoys being the center of attention. Similar to Donald Trump, Musk is someone who loves attention. Musk smoked marijuana on Joe Rogan to create a buzz. All publicity is good publicity, and the only thing he’s scared of the most is when you’re not talking about him.”
Whatever the case, Musk’s “funding secured” tweet garnered him some costly publicity. According to one estimate, the tweet cost him approximately $327,868 per character.
Musk’s latest tweet also led to a 7% decrease in Tesla’s shares. “I don’t have much, but I believe in you and your vision,” tweeted Drew G, “Unfortunately, I invest what little I have into Tesla and continuously lose months of savings due to your tweets. Please think of us small people.”
It should be noted that, at the moment, the settlement agreement is yet to be approved by the courts. If Musk isn’t careful, something worse may be waiting for him in the wings.