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Elon Musk Settles - FULL STATEMENT

Elon Musk Settles - FULL STATEMENT

Elon Musk Settles SEC Fraud Charges; Tesla Charged With and Resolves Securities Law Charge

Musk and Tesla have agreed to settle the charges against them without admitting or denying the SEC’s allegations.

Settlement Requires Musk to Step Down as Tesla’s Chairman; Tesla to Appoint Additional Independent Directors; Tesla and Musk Agree to Pay $40 million in Penalties
FOR IMMEDIATE RELEASE
2018-226

Washington D.C., Sept. 29, 2018 —
The Securities and Exchange Commission announced today that Elon Musk, CEO and Chairman of Silicon Valley-based Tesla, Inc., has agreed to settle the securities fraud charge brought by the SEC against him last week. The SEC also today charged Tesla with failing to have required disclosure controls and procedures relating to Musk’s tweets, a charge that Tesla has agreed to settle. The settlements, which are subject to court approval, will result in comprehensive corporate governance and other reforms at Tesla—including Musk’s removal as Chairman of the Tesla board—and the payment by Musk and Tesla of financial penalties.

According to the SEC’s complaint against him, Musk tweeted on August 7, 2018 that he could take Tesla private at $420 per share — a substantial premium to its trading price at the time — that funding for the transaction had been secured, and that the only remaining uncertainty was a shareholder vote. The SEC’s complaint alleged that, in truth, Musk knew that the potential transaction was uncertain and subject to numerous contingencies. Musk had not discussed specific deal terms, including price, with any potential financing partners, and his statements about the possible transaction lacked an adequate basis in fact. According to the SEC’s complaint, Musk’s misleading tweets caused Tesla’s stock price to jump by over six percent on August 7, and led to significant market disruption.

According to the SEC’s complaint against Tesla, despite notifying the market in 2013 that it intended to use Musk’s Twitter account as a means of announcing material information about Tesla and encouraging investors to review Musk’s tweets, Tesla had no disclosure controls or procedures in place to determine whether Musk’s tweets contained information required to be disclosed in Tesla’s SEC filings. Nor did it have sufficient processes in place to that Musk’s tweets were accurate or complete.

Musk and Tesla have agreed to settle the charges against them without admitting or denying the SEC’s allegations. Among other relief, the settlements require that:

+++
Musk will step down as Tesla’s Chairman and be replaced by an independent Chairman.
Musk will be ineligible to be re-elected Chairman for three years;
Tesla will appoint a total of two new independent directors to its board;
Tesla will establish a new committee of independent directors and put in place additional controls and procedures to oversee Musk’s communications;
Musk and Tesla will each pay a separate $20 million penalty. The $40 million in penalties will be distributed to harmed investors under a court-approved process.
+++

“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,” said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division.

“As a result of the settlement, Elon Musk will no longer be Chairman of Tesla, Tesla’s board will adopt important reforms —including an obligation to oversee Musk’s communications with investors—and both will pay financial penalties,” added Steven Peikin, Co-Director of the SEC’s Enforcement Division. “The resolution is intended to prevent further market disruption and harm to Tesla’s shareholders.”

The SEC’s investigation was conducted by Walker Newell, Brent Smyth, and Barrett Atwood and supervised by Steven Buchholz, Erin Schneider, and Jina Choi in the San Francisco Regional Office and Cheryl Crumpton in the SEC’s Home Office.

__________________

Now, without looking it up, who can tell me the name of the Chairman of the Board of Apple?

jlhm | 29 septembre 2018

I guess the board will need to take way Elon’s twitter access :-)

Mel. | 29 septembre 2018

SamO,
Thanks for this news

SamO | 29 septembre 2018

@jlhm,

Yup. At least with regard to anything about TSLA. His personal communications will be unfiltered with regard to SpaceX, AI, blunts and robot sex-workers.

SamO | 29 septembre 2018

I'm sure that he wanted to remain Chair, but he'll still sit on the board and the runway for the end of the quarter is going to blow people's minds.

Profitable and cash flow positive.

BOOM.

NOLEK SUM | 29 septembre 2018

You are predicting FREE CF positive?

mrburke | 29 septembre 2018

The board will most likely hire a CTO. Chief Tweeting Officer who reports to the board and/or chairman. Musk will be required to run all tweets and other like communications through that person.
The world is lucky. We get to keep the person who is changing the world for the better, in charge of the company that is doing the same.

jlhm | 29 septembre 2018

I think this is excellent news for tesla and the future of it. Elon will continue to be very much part of tesla and a board investors will have more trust in.

SamO | 29 septembre 2018

Glad that the SEC is finished with no admission of wrongdoing.

Not optimal communication.

Baywood | 29 septembre 2018

Great news, 3 years only, CEO, more peripheral help, I like it and can finally relax.

aptwo | 29 septembre 2018

Now the question is, will the stock prices go back up? should I buy some?

2015P90DI | 29 septembre 2018

I can live with that settlement! Certainly much better than many of the alternatives. Don't like that $40,000,000 is going to the government. Would much rather have seen it go to better use. But, it's basically the outcome I had hoped for.

Hopefully, lesson learned. Tesla continues on with it's visionary still leading the way. Don't think we could have asked for much more.

2015P90DI | 29 septembre 2018

And, now is "probably" the time to jump back into TSLA. "almost" sure to go up on Monday! I added the quoted words to protect myself from the same mistakes!! LOL. If Elon had added "possibly" to "funding secured", it wouldn't have cost him and Tesla $40,000,000!

sosmerc | 29 septembre 2018

And this does not prevent future efforts to go private? Couldn't Musk and friends "secure funding" for real and still arrive at Elon's original plan?

carlk | 29 septembre 2018

People who sold before Thursday close and bought before Friday close would have made killings. SEC should investigate any unusual transactions during the two days....just kidding they would never do that.

carlk | 29 septembre 2018

@sosmerc Anyone inside or outside the company can make an offer to the board to buy out the company. Not sure if Elon still wants to do that though. I would say no otherwise he has no reason to settle the lawsuit.

2015P90DI | 29 septembre 2018

Elon turning down the first deal could have been intentional!! LOL. Knew the stock would go down by doing so. Then knew it would go right back up after he accepted the deal. Now we'll probably have another investigation into that!! LOL. I'm kidding people!

4barkie | 29 septembre 2018

Does that 40 million go to the government? I thought I read somewhere that $ goes to " the investors that were harmed" by the tweet. Whoever they are.....

NKYTA | 29 septembre 2018

So, where does this $40m go?

To pay off shorts even more, that got their wish when the stock dropped so they could cover?
What about the longs that were hurt?

What about the longs that were hurt via SEC?

Riddle me this:

You are a long TSLA owner, you beleive in Elon’s Mission. It’s a US company employing tens of thousands of people. What about that is not good, except that by investing in TSLA you are gambling?

You are short TSLA, definitely gambling, purely to make money with none of the pluses of the above.
Or, even worse, you actually don’t beleive in the mission and/or you don’t give a shit about US jobs.

Why all the hate from (from what appears to be, mostly the Right) if this guy might employ a significant fraction of total US jobs (jobs per company)?

Yep, Elon took a big ding for the Funding secured line. If his tweets need to get reviewed, that is sensible. Still CEO, still on board, just not Chair.

If Chanos gets some % of that payout, I’ll sue to get my % payout and sue the shorts with the proceeds.
They are leeches, or mosquitos. No value to anyone but themselves.

David N | 29 septembre 2018

It might now be known as the 40 Million dollar tweet

SUN 2 DRV | 30 septembre 2018

"According to the SEC’s complaint against him, Musk tweeted on August 7, 2018 that he could take Tesla private at $420 per share"

The SEC is blatantly WRONG... Musk actually tweeted "“Am considering taking Tesla private at $420."

CONSIDERING is the key word, and makes a HUGE difference in what he was saying. Even if he had the funding fully documented in writing that statement did NOT say he COULD or WOULD take the company private.

Lots of potential deals come undone before they're finalized.

He simply said he was CONSIDERING it... Lots of deals get considered in Silicon Valley every single day... So unfair of SEC, I don't blame Elon fo rbeing outraged and initially trying to fight it...

SamO | 30 septembre 2018

He's trapped the shorts. He rejected the first SEC deal.

The shorts were told "this could take years to resolve."

Instead, he settles on a Saturday after they INCREASE their short position.

Monday open of markets should be really, really interesting.

Then Tuesday, Tesla will likely announce production numbers.

Fresh squeezed short juice anyone?

JustSaying | 30 septembre 2018

Yes, thanks, a large with double shot of Tito's.

bobolynx | 30 septembre 2018

Thank you SUN 2 DRV. I do not tweet, so it was super interesting to see (and think about) the actual tweet as being "Am considering taking Tesla private..." It seems to me that any related information that follows, for example, "funding secured" becomes a consideration, not an actual statement that it has already been accomplished. How could any business person interpret this as if all the legalities of an offer had already been signed, sealed, and delivered regarding the funding if the idea is simply being "considered?" At any rate, I fail to see how the statement could possibly be interpreted as fraud, that is, a willfully misleading statement known to in fact to be materially in error but stated as fact (that is, a willful lie).

Baywood | 30 septembre 2018

70,000 cars at $70,000 average is nearly 5 B$, times 25% margin is 1.2 B$ in profit in 3 months.

SamO | 30 septembre 2018

@Baywood,

I don't think the average ASP over the entire fleet of sales (S3X) will be 25% margin.

Yet.

@JustSaying,

Teslaquila?

+1 SUN,

There was a technical violation of the tweet occurring during trading hours, hence IMO, the settlement and the oversight.

JustSaying | 30 septembre 2018

Teslaquila is probably better , I am sure the short juice will be very bitter.

Baywood | 30 septembre 2018

I’m not an economist, only an engineer, so take my numbers as broad estimates.
20k S/X at $100k + 50k M3 at $55k = about $70k per
Same for margins of 33% and 20% respectively

SO | 30 septembre 2018

I’d bet that Elon has said “this is bullish!t” many times and feels he is right. But It is what it is and has to move on. The 40 million will probably go to the shorts. May they lose it all shorting TSLA.

carlk | 30 septembre 2018

My guess is the board asked him to settle because of the 14% drop in stock price Friday. Reality verses fight for what you think is right at all cost. BTW this is the first time I realize SEC's role is also to protect shorts that have the purpose of seeing the company to fail. Pretty scary thought imo.

ravisundaramam | 30 septembre 2018

@carlk: "BTW this is the first time I realize SEC's role is also to protect shorts that have the purpose of seeing the company to fail."

The investors and the shorts have diametrically opposite interests. Treating them both as "investors" is wrong. Longs are the investors and Shorts are the anti-investors.

It is high time, all the longs of all the companies to petition SEC /Courts to make clarify the fiduciary responsibility of the board and the company is to the longs/investors and not to the shorts. Harming the shorts could be the duty of CEO in some sense.

Tesla is just 50 billion. All our mutual funds investments, all our retirement savings in stock are being hurt by the shorts.

There is a FDIC to prevent a run on the banks by guaranteeing small depositors and day to day business operations. There is no such equivalent for the companies that depend on capital markets. There is no restriction on the shorts in rumour mongering, whisper campaigns and downright astro turfing to fool small time option traders. We need action on this front.

Tropopause | 30 septembre 2018

How many board members prior to this settlement? Can the new chairman come from the existing members, thus adding two new members, or must also add a new independent chairman as well? Total of 3 new members.

Al1 | 30 septembre 2018

I agree that SEC duties need to be better defined. One thing is shorting and the other is spreading lies and disinformation in attempt to destroy value.

Tropopause | 30 septembre 2018

And this is why China will surpass the USA. China promotes innovation and growth from within. The US promotes stagnation and outsourcing. China would love to have Tesla as their own home-grown hope for the future, while the US tries to short and stifle Tesla to death.

carlk | 1 octobre 2018

It puzzles me that Trump administration's central theme is deregulation and let corporations to run wild. Yet the SEC with Trump appointed chairman would do this what could destroy a great American company. That made me to think there's agenda there beyond what SEC said motivation of the lawsuit. I have no particular love of China but the thought did occur to me that Elon could sell and move the company to China to teach those buffoons a lesson.

hasnat.rox | 1 octobre 2018

Thanks for the latest update.I'm still assuming that he wanted to remain the chairman. I just hope that the investors don't start pulling out money now that he's not the chairman anymore.

Source: https://thetechnologypost.com/hill-climb-racing-mod-apk/

SamO | 1 octobre 2018

Ha ha ha.

Wait.

We’re you serious?

PrescottRichard | 1 octobre 2018

I’m 16% sure investors aren’t pulling money out...

SamO | 1 octobre 2018

lol

Rocky_H | 1 octobre 2018

@bobolynx, Quote: “It seems to me that any related information that follows, for example, "funding secured" becomes a consideration, not an actual statement that it has already been accomplished.”

That’s not how that works, because words and verb tenses DO have meanings. Let’s say you said, “I’m considering buying this car. I have enough cash for it with me in this duffle bag right here.” You’re saying it would still be “true” if you opened the bag and there were nothing in there, because the word “considering” was in the sentence before? No. The statement that you have the cash is a factual statement about having money. That is separate from the “considering” about an uncertain decision process about whether to make a purchase or not. SOOO many people keep getting that wrong.

SamO | 1 octobre 2018

Unblock @Rocky_H for a +1

Rocky_H | 1 octobre 2018

Remember back to “ye olden dayes” (last week) when Musk turned down almost the same offer from the SEC that would have required him to resign as Chairman of the board, and was deciding to fight to keep it? @SamO was gloating about how great that was, because the Chairman spot was the most important, influential position:

https://forums.tesla.com/forum/forums/sec-charges-em-fraud?page=1

Me: Quote: “His involvement as CEO seems by far the more important part.”

SamO, Quote: “Chair of the Board is the most important role. He/She controls the direction of the company and is the direct boss of the CEO.”

One day goes by, and Musk does take a deal requiring him to resign as chairman of the board, and SamO is gloating about how great that is because the chairman position is worthless:

SamO Quote: “Now, without looking it up, who can tell me the name of the Chairman of the Board of Apple?”

Wow. Dude, your @carlk-ness is showing.

Rocky_H | 1 octobre 2018

Wow, and I just found this gem in another thread too:

@SamO, Quote: "Quick: Who is the chairman of the board of Apple. (don't look it up)

Answer: You don't know because it doesn't matter."

*previously*

Quote: "Chair of the Board is the most important role."

SamO | 1 octobre 2018

ha ha ha Rocky_H . . . amazing. Keeping his role on the board (even if not chairman) and having the removal temporary rather than permanent changes the calculus.

CEO v Chairman + Chief Product officer were the options.

Thanks for playing and blocked again for intentionally pretending not understand nuance.

SamO | 1 octobre 2018

Throughout all of this, Musk must remain either CEO or executive chairman and chief product officer.

Ultimately, Musk could earn up to $55.8 billion in stock and awards, if Tesla's market cap reaches $650 billion. It is currently around $52 billion. Musk will receive no other compensation for his work at Tesla outside this plan.

https://www.cnbc.com/2018/03/21/tesla-shareholders-approve-elon-musks-mu...

SamO | 1 octobre 2018

By the way, how long did you have that copy and pasted on your notepad?

lol

carlk | 1 octobre 2018

The most important person is neither the CEO nor chairman of the company. Whoever owns and influences majority of shares is the person in control. That person at Tesla is still Elon no matter what his title is.

gregh9195 | 1 octobre 2018

It's all a conspiracy! Big oil and car execs secretly lobbied the government to impose sanctions on Musk and Tesla to keep the rival, game-changing automaker into a failure! They're more vulnerable than ever and their "independent directors" are going to be installed to sabotage the company to eliminate the competition for Ford, GM, Fiat/Chrysler, and all the other oil pumpers! They're gonna do to Musk what Yahoo! did to tumblr! or what Yahoo! did to Community or what Yahoo! did to mail security!

I'm partially kidding but I'm starting to believe my own nonsense.

ReD eXiLe ms us | 1 octobre 2018

carlk is correct.

SamO: Wait... It's possible to UNBLOCK people? I must have missed that option...

Rocky_H have disagreed on many things. I likethat he does a great job of supporting his position. I respond, I hope, by better supporting my own. So, I don't block Rocky_H, or Grinnin' Ron, or Pungoteague_Dave, or vmulla, or Brian H, or Roamer, or other people here that have reasonable positions that I may disagree with from time-to-time. I look forward to their input.

Rocky_H: I understand that interpretation of the syntax of the 'Funding secured.' tweet, though I disagree with it. Yes, it wasn't part of the same sentence, but it was part of the same paragraph. That makes it a continuing statement in my mind. You may notice that I tend to compose my paragraphs as a list of beginning, end, and middle statements. So, I also read paragraphs the same way. I figure that periods are used within a paragraph to avoid making a run-on sentence. What you describe is a rather staccato method of reading interpretation, that while certainly correct from a certain point of view, doesn't really flow that well in communication.

I don't use twitter, because I'm barely able to keep within the character limit of these input forms. Yes, there is one, I've run across it before. Too many times. ;-) Anyway, I figure certain shortcuts are a given when it comes to twitter and that most who use it would have gotten used to them by now.

Personally, I dislike sending either instant messages or text messaging. I prefer e-mail or forum posts. Though I'm beginning to think I should open a more formal blog.

ReD eXiLe ms us | 1 octobre 2018

gregh9195: There are multiple conspiracies. Why aren't there laws to prevent $#0r+§ from lying publicly? Where are the penalties for Goldman Sachs predicting TSLA would go down by 30% after Tesla confirmed they would not need to borrow another dime from investment banks for the foreseeable future? Why do major motion pictures (almost) never feature EVs, even in animation?

How can ANALysts continue to maintain any level of integrity after several years of being completely wrong about TSLA?

Rocky_H | 2 octobre 2018

@SamO, What you were doing wasn’t complex enough to have any nuance to it. When you thought Musk was going to be fighting to keep the chairman role, you were explicitly arguing that it was more important than the CEO role. Once he changed his mind and decided it was OK to give it up, you flipped too, arguing that the chairman role was utterly worthless. You weren’t thinking for yourself at all.