Elon Musk may have tweeted the most expensive tweet in recent history as his his post on Twitter last month that he had “funding secured” for a buyout of the electric-car company—Tesla— at $420 a share will cost him and the company $40 million.
In a deal reached with the Securities and Exchange Commission to resolve the securities fraud charges, Musk will step down as chair of Tesla for three years but would remain as chief executive officer. The possibility of taking Tesla private at $420 share rattled the stock market and immediately captured the attention of the US financial regulator, SEC, who argued that the company did not have the funding to go private secured, pointing out that the false information hurt investors by causing significant market disruption.
Am considering taking Tesla private at $420. Funding secured.
— Elon Musk (@elonmusk) August 7, 2018
Both he and the company will each pay a $20m fine, as Tesla was fined for “failing to have required disclosure controls and procedures relating to Musk’s tweets”. According to the agreement reached with the SEC, the fines will be distributed to harmed investors under a court approved process and Tesla will have to appoint two new independent directors to its board and hire a lawyer to monitor Musk’s communications including his tweets.
In a statement, co-director of SEC’s enforcement division, Stephanie Avakian says the “The total package of remedies and relief announced today are specifically designed to address the misconduct at issue by strengthening Tesla’s corporate governance and oversight in order to protect investors”.
In addition to the other terms, Musk had to agree to a condition where he is not allowed to either “admit nor deny” whether he was guilty of committing securities fraud, meaning that he cannot publicly state that he did nothing wrong.
Musk has long been a big time influence on Twitter, using the platform to announce product updates, trumpet accomplishments, attack critics and even sometimes trigger occasional stock price spasm.
The company, whose shares have been hit hard since the S.E.C. filed the lawsuit, did not immediately comment on the settlement. On Friday last week, its stock dropped almost 14 percent. The settlement clears a big headache for Tesla, but other problems remain as SEC is continuing to look into the company’s past claims about its production goals and the company’s board must decide who should replace Musk after he steps down as chairman.