Elon Musk’s August 4 tweet has brought about a $20 million fine for both himself and Tesla. The Securities & Exchange Commission accused Musk of deception to boost share prices.
Musk’s Tweeting Mistake
At the beginning of August, Elon Musk, CEO and chairman of Tesla, tweeted that he planned to take the electric vehicle maker private once share prices hit $420. Within that Twitter post, he also added that he had “funding secured.” As it turned out, the claim, which caused share prices to skyrocket, had been a joke. It was a 420 drug joke he was making with his girlfriend at the time, Grimes. The claim was essentially created on a whim.
That said, it sent investors – and the company, itself – into a complete frenzy. Tesla teams worked to try to cover for the claim. Throughout the six weeks that followed, Musk generated widespread confusion among even his most loyal shareholders. This placed him in the spotlight of the Securities and Exchange Commission (S.E.C.). Last Friday, the S.E.C. formally accused Musk of fraud, causing the company to lose nearly 14 percent of its value in one day.
SEC Accusations of Fraud
The S.E.C. accused Musk of manipulating markets with his Twitter account to make a speculative and exciting buyout offer. The S.E.C. took aim at Musk’s roles as both chairman and CEO. Immediately, Tesla share prices tanked by over 13 percent, to the lowest point they’ve reached this year.
At first, Musk refused to seek a settlement. That said, by the time the weekend came to a close, he had agreed that he would remain on as CEO but would step down as chairman for three years. Furthermore, both Musk and Tesla are required to pay a fine of $20 million each. This settlement has been agreed upon without the necessity to admit or deny guilt. That said, it completes a probe into the company that likely would have brought about its rapid end.
Tesla and Musk’s $20 Million Fines
The money from the fines will be used to compensate those who were caused harm as a result of Musk’s tweet. A court will decide exactly how those funds are to be distributed, and who qualifies to receive them.
Equally, Tesla has agreed to appoint two additional independent directors to its board. Furthermore, Tesla is required to significantly increase oversight and management of Musk’s frequently misleading and confusing communication habits, particularly when it comes to his use of social media platforms.