Tesla and Chief Executive Elon Musk have settled a Securities and Exchange Commission lawsuit that alleged the outspoken businessman misled investors about his prospective effort to take the electric-car company private.
Musk and the Palo Alto, Calif., company agreed to pay a total of $40 million, and he will give up his chairmanship for at least three years. Musk, however, will remain chief executive and retain a seat on the company's board of directors. Tesla, meanwhile, is required to install an independent chairman and add two new board members, according to terms of the settlement, which the SEC announced Saturday.
Musk and Tesla will each pay $20 million to settle the case; both reached the deal without admitting wrongdoing. The company declined to comment.
The SEC charged Musk with fraud Thursday, alleging that his tweets about taking Tesla private _ at $420 a share _ were "false and misleading." As part of the lawsuit, it asked a federal court to remove him from the company's leadership and ban him from running a public company.
Although the case was settled swiftly, it marked yet another ugly chapter in a difficult stretch for Tesla, which has contended with an uneven rollout of its Model 3 sedan, cash shortage issues and strange behavior by Musk. In recent months, he has smoked marijuana on a comedian's podcast and made derogatory comments about a diver involved with the rescue of boys trapped in a cave in Thailand, prompting a lawsuit from the man.
Musk and the board will have to grapple with the fact that the cash-bleeding company must pay back $1.15 billion in debt over the next six months.
Tesla's stock sank 14 percent Friday after the SEC filed its lawsuit, wiping out more than $7 billion in shareholder value, putting pressure on the company's board to settle its dispute with the government.
"Elon Musk apparently had a change of heart, likely due to pressure from investors," said Michelle Krebs, executive analyst at Autotrader. "He ultimately agreed to a deal with the SEC that he had walked away from last week. Considering the drastic punishment the SEC had announced, Musk and Tesla got lucky."
