Elon Musk has been fined $20million and will be forced to resign as chairman of Tesla after reaching a settlement on fraud charges.
Musk was accused of posting ‘false and misleading information’ to Twitter about taking his company private at $420 a share on August 7.
The acclaimed engineer told his followers he’d secured funding and only needed a shareholder vote to proceed.
The SEC claims Musk’s tweets had no factual basis, and caused chaos in the stock market, which hurt investors.
Musk’s tweets saw Tesla’s stock jump by more than six per cent on August 7, but the price crashed by more than 13 per cent when the SEC filed its complaint.
The SEC claimed Musk had not lined up backers and he’d predicted the $420-per-share price based on a 20 per cent premium to the previous day’s closing rate, because he thought this would be the typical uplift paid by a bidder taking a firm private. This calculation came out at $419.
The SEC allege Musk upped it to $420 because the number is code in marijuana culture referring to the consumption of the drug, and he thought his girlfriend, Canadian singer Grimes, would find it funny.
‘According to Musk, he calculated the $420 price per share based on a 20 per cent premium over that day’s closing share price because he thought 20 per cent was a ‘standard premium’ in going-private transaction,’ court documents submitted by the SEC said.
‘This calculation resulted in a price of $419, and Musk stated that he rounded the price up to $420 because he had recently learned about the number’s significance in marijuana culture and thought his girlfriend “would find it funny, which admittedly is not a great reason to pick a price”.’
He will be able to continue as the CEO of Tesla, but cannot be chairman again for three years. Musk will be solely responsible for paying his $20million fine.
Tesla will have to pay a second $20million fine, and appoint two independent directors to replace Musk.
In a statement to TechCrunch on Thursday, Musk said the complaint was ‘unjustified’.
‘This unjustified action by the SEC leaves me deeply saddened and disappointed,’ he said.
‘I have always taken action in the best interests of truth, transparency and investors.
‘Integrity is the most important value in my life and the facts will show I never compromised this in any way.’
Neither Musk nor Tesla admitted or denied the SEC’s findings as part of the settlement.
Tesla did not immediately respond to a request for comment and Musk could not immediately be reached for comment.
Saturday’s settlement is not the end of Musk’s legal dramas.
The embattled tech whiz is also facing legal action from a British diver who helped to rescue a soccer team of Thai boys when they became trapped in a cave.
Vernon Unsworth alleges Musk falsely accused him on Twitter of being a pedophile.
Musk called Unsworth ‘a pedo guy’ after the Brit criticized him in a television interview about the dramatic rescue.
Musk and SpaceX engineers built a small submarine and shipped it to Thailand to help with the rescue. The device wasn’t used, and Unsworth called it a ‘PR stunt’ during a television interview.
Later, Musk accused Unsworth of moving to Thailand to ‘be with a bride who was about 12 years old’.
In a series of tweets on July 15, Musk, who personally delivered the submarine to the cave, wrote that he never saw Mr Unsworth and challenged him to show a video of the final rescue.
‘Sorry pedo guy, you really did ask for it,’ he tweeted. Later on Twitter, Musk wrote: ‘Bet ya a dollar it’s true.’
The lawsuit filed in Los Angeles federal court seeks more than $75,000 in damages and a court order stopping Mr Musk from making further allegations.
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