The Securities and Exchange Commission (SEC) is suing Tesla CEO Elon Musk for committing securities fraud and it looks like the outspoken executive was originally going to settle with the government.
According to the Wall Street Journal, the SEC created a settlement with Musk and had gotten it approved from the agency’s commissioners. Everything was ready to go and the settlement was slated to be filed yesterday morning.
However, Musk’s lawyer reportedly called the SEC and told them that his client was no longer interested in settling. This triggered a series of events as the agency “rushed to pull together the complaint” against the CEO of Tesla. While nothing is official, this seems plausible as yesterday’s press conference appeared hastily organized and started approximately 20 minutes late.
CNBC is backing up the reporting of the Wall Street Journal and is filling in new details. In a report published earlier today, the network said the SEC agreement was a slap on the wrist as it wouldn’t force Musk to admit guilt and only required him to pay a “nominal fine.” However, the settlement had one key condition that likely torpedoed the deal – Musk would have to step down from his position as Tesla chairman for two years and the company would have to appoint two new independent directors.
Sources told the publication that Musk refused to settle because he “felt that by settling he would not be truthful to himself, and he wouldn’t have been able to live with the idea that he agreed to accept a settlement and any blemish associated with that.”
It remains to be seen if Musk made a wise move, but the SEC is now seeking a “permanent injunction disgorgement, civil penalties, and a bar prohibiting Musk from serving as an officer or director of a public company.” The agency says this is necessary because Musk made a series of false and misleading statements about taking the company private and having secured funding to do so. Despite tweeting this, the SEC’s lawsuit says “Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source.”
Musk has called the lawsuit “unjustified” and Tesla’s board of directors has said they’re “fully confident in Elon, his integrity, and his leadership of the company.”
While Tesla’s board might be behind Musk, investors aren’t happy as the lawsuit has caused the company’s stock price to plummet. When this article was written, the stock price was $268.69 per share which is a 12.63% drop from yesterday.