By ELIZABETH HENNESSY
Elon Musk, co-founder and chief executive officer of Tesla, has been asked to step down as chairman after announcing his plans to take the company private back in August and is now facing a lawsuit from the Security and Exchange Commission (SEC).
“Am considering taking Tesla private at $420. Funding secured,” Musk said on Twitter in August. His tweet was the first the company and the SEC had heard of his plans to take the company private.
According to the official complaint from the SEC, “In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source.” The SEC is responsible for protecting investors and filed a lawsuit against Musk.
According to usa.gov, “The Securities and Exchange Commission oversees securities exchanges, securities brokers and dealers, investment advisors and mutual funds in an effort to promote fair dealing, the disclosure of important market information and to prevent fraud.”
A settlement has been made in regards to the lawsuit between Musk and the SEC that Musk would step down as chairman of the board of directors for Tesla for three years and pay a fine of 20 million dollars for the “false and misleading statement” that Musk tweeted back in August; a part of the settlement Musk will neither affirm nor deny in the allegations. Musk, however, will remain the CEO of the company.
According to the official complaint, “On November 5, 2013, Tesla publicly filed a Form 8-K with the Commission stating that it intended to use Musk’s Twitter account as a means of announcing material information to the public about Tesla and its products and services and has encouraged investors to review the information about Tesla published by Musk via his Twitter account.”
Since then, Musk’s twitter has been a public platform for his company, which allows the SEC to file the lawsuit on his tweet, and its false claims.
On Aug. 2, Musk shared his desire to take the company private with the Tesla’s Board of Directors, chief financial officer and general counsel. He shared his reasoning for wanting to go private in the email.
Musk explained in an email that being public, “[s]ubjects Tesla to constant defamatory attacks by the short-selling community, resulting in great harm to our valuable brand.” Musk tweeted five days later.
Since the tweet was posted back in August, Tesla has confirmed to investors that it has no plans to go private, despite the series of tweets on Musk’s twitter. The tweet did have an effect on the market.
According to the official complaint, “From the time of Musk’s first tweet that day until the close of trading on August 7, Tesla’s stock price increased by more than 6 percent on significantly increased volume and closed up 10.98 percent from the previous day.”
Since then, Tesla’s stock value has declined.