Two days after the Securities and Exchange Commission sued Elon Musk for securities fraud related to misleading tweets about Tesla, Musk and Tesla have reached an agreement with the SEC. The settlement allows Musk to stay on as CEO, but requires him to relinquish the role of Chairman of the Board, and not to seek that post again for three years. In addition, Musk must pay $20 million in fines and agree to comply with corporate communication processes. Tesla has also agreed to pay $20 million in fines and to appoint two new outside members to the board. Musk and Tesla agreed to the terms without admitting or denying wrongdoing. The settlement still must be approved by the federal court in Manhattan where it was filed.
Tesla’s stock cratered during Friday trading, dropping almost 14 percent after news of the lawsuit broke after hours Thursday. That impact almost certainly pressed Musk and Tesla to pursue the settlement quickly. It also underscored the street’s confusion over the news that Musk rejected a prior settlement offer, which had been the impetus for the SEC to file suit. According to reports, the SEC’s earlier settlement offer had also required Musk to give up the chairman’s seat, albeit for only two years instead of three.