Elon Musk’s settlement with the SEC approved by judge, sending shares higher
Image Credits: Diego Donamaria / Getty Images
The saga between Tesla CEO Elon Musk and the U.S. Securities and Exchange Commission, which began with a now infamous “funding secured” tweet about taking the electric automaker private, is officially resolved.
A federal judge has approved Musk’s settlement with the SEC over securities fraud allegations. Bloomberg was the first to report the judge’s approval.
Tesla shares jumped more than 4 percent on the news.
The SEC alleged in a complaint filed in September that Musk lied when he tweeted on August 7 that he had “funding secured” for a private takeover of the company at $420 per share. Federal securities regulators reportedly served Tesla with a subpoena just a week after the tweet. The SEC filed a complaint alleging securities fraud six weeks later.
The complaint was filed after Musk and Tesla’s board abruptly walked away from an agreement with the SEC. The board not only pulled out of the agreement, it issued a bold statement of support for Musk after the charges were filed. The NYT reported that Musk had given an ultimatum to the board and threatened to resign if the board pushed him to settle.
A settlement was eventually reached anyway, albeit with stiffer penalties than the original agreement. However, this problematic chapter in Tesla’s history wasn’t over despite the two parties reaching a settlement.
An order by U.S. District Judge Alison Nathan asked the SEC and Tesla to submit a joint letter explaining why the court should approve the consent judgment. The joint letter was filed October 11. Nathan determined the consent judgment was “fair and reasonable,” and approved it Tuesday.
Musk agreed, in the settlement reached on September 29, to step down as chairman of Tesla and pay a $20 million fine.
Musk is supposed to resign from his role as chairman of the Tesla board within 45 days of the agreement. He cannot seek reelection or accept an appointment as chairman for three years. An independent chairman will be appointed, under the settlement agreement.
Tesla agreed to pay a separate $20 million penalty, according to the SEC. The SEC said the charge and fine against Tesla is for failing to require disclosure controls and procedures relating to Musk’s tweets.