Elon Musk, the face, and Chairman of Tesla was accused of fraud by the FEC who pursued Musk in a lawsuit on behalf of shareholders. Musk was accused of lying about having funds to take the company private. The massive settlement could lead to the CEO stepping down. Stock market analysts are unsure on if the company can survive without him.
Tesla and its CEO Elon Musk have agreed to pay a total of $40 million and make a series of concessions to settle a government lawsuit alleging Musk duped investors with misleading statements about a proposed buyout of the company.
The settlement allows Musk to remain CEO of the electric car company but requires him to relinquish his role as chairman for at least three years. Tesla must hire an independent chairman to oversee the company.
The Securities and Exchange Commission announced the settlement Saturday, just two days after filing a case seeking to oust Musk as CEO.
Musk, a billionaire, and Tesla, a company that ended June with $2.2 billion in cash, each is paying $20 million to resolve the case, according to Fox 5.
Musk had raised hackles by ridiculing stock market analysts for posing fairly standard questions about Tesla’s shaky finances, and calling a diver who helped rescue 12 boys on a Thai soccer team from a flooded cave a pedophile, triggering a defamation lawsuit. He was also recently caught on a widely circulated video apparently smoking marijuana, a legal drug in Tesla’s home state of California, ABC reported.
The erratic behavior has convinced more analysts that Tesla needs to find a replacement for Musk, but the SEC settlement will allow the company to do so on its own timetable if it decides to hire a new leader.
Tesla is also under mounting pressure to overcome its past manufacturing problems and produce enough vehicles to become consistently profitable after years of huge losses.
A gauge of the company’s progress should come within the next few days when Tesla is expected to release its vehicle production numbers for the July-September period.