Elon Musk has agreed to step down as Tesla chairman for three years
The settlement requires that he step down as chairman of the company for a minimum of three years and that a new “independent chairman” be appointed within 45 days. Both Musk and Tesla have agreed to pay $20 million, though that isn’t that much for either of them considering Musk’s net worth is around $20 billion and Tesla’s is somewhere around $50 billion.
Or was, that is. Tesla’s shares have dropped 14% since the SEC’s announcement of their lawsuit. In August, Tesla’s shares rose by around 7% following Musk’s tweets that Saudi Arabia would be taking Tesla private at a 20% premium over that day’s closing share price, but they’ve fallen a total of 30% since then.
It is somewhat surprising that Musk has reached an agreement with the SEC – Friday brought the news that he had backed out at the last minute from a settlement that would have had him step down from chairman for only two years. The reason he didn’t sign it was because “he felt that by settling he would not be truthful to himself,” and would be accepting a blemish on his reputation.
Both settlements did not require either party to confirm or deny the SEC’s allegations that Musk had not in fact “even discussed, much less confirmed, key deal terms, including price” with Saudi Arabia. Rather amusingly, the SEC also said that Musk had reached $419 by assuming that 20% was a “standard premium” but then rounded up the price to $420 because he “had learned about the number’s significance in marijuana culture.”
Musk really needs to learn how to avoid ‘marijuana culture’ – Tesla’s shares also fell by 9% after he smoked one puff of weed on “The Joe Rogan Experience” YouTube podcast three weeks ago.
It appears this settlement isn’t really a win for anybody. Musk gets kicked out of his chairman position. Tesla shareholders lose several billion in total as shares go down. Musk isn’t forced to resign from CEO as the SEC wanted. And Saudi Arabia still only has 5% of Tesla shares, though they did recently invest $1 billion in the electric car start up Lucid Motors.