Elon Musk will step down as Tesla chairman in a settlement with the SEC

Still in the driver’s seat.
Still in the driver’s seat.
Image: Reuters/Lucy Nicholson
We may earn a commission from links on this page.

It could have been worse. In a settlement with the US Securities and Exchange Commission announced today, Elon Musk and Tesla will each pay a $20 million penalty, while Musk has 45 days to step down as chairman and will be ineligible from holding that title for at least three years. The company will also appoint two new independent directors to its board.

But Musk will stay on as CEO, after many had begun to wonder how the carmaker would fare without him in the driver’s seat. After a series of ill-advised tweets that angered many investors, there had been speculation he would be banned from serving as an officer at Tesla, or any public company. Musk co-founded Tesla 15 years ago, and he has steered it to a market cap eclipsing Ford’s, repeatedly confounding short sellers betting against him.

He ran into trouble after tweeting in early August that he had secured funding to take Tesla private. (Later that month he announced he had dropped the plan.)

An SEC complaint filed on Sept. 27 (pdf) alleged that in doing so Musk issued “false and misleading” statements, while also failing to properly notify regulators of material company events.

He cited short sellers in his follow-ups about possibly taking Tesla private, having taunted them in the past and calling them “jerks who want us to die.”

In its complaint, the SEC said Tesla had notified the market in 2013 that it intended to use Musk’s Twitter account as a means of announcing material information about the company, and had encouraged investors to review Musk’s tweets. It added that the company did not have sufficient processes in place to ensure that Musk’s tweets were accurate or complete.

Without admitting to or denying the agency’s allegations, Musk and Tesla have agreed to settle the charges against them, according to the SEC. As part of the deal, it stated, the company’s board will “adopt important reforms—including an obligation to oversee Musk’s communications with investors.”