Elon Musk has been forced to leave his position as the chairman of Tesla. While Musk will still continue as CEO of the company, his exit as the chairman has left many shocked and confused over the incident.
On 30 September, the SEC pressed fraud charges against Elon Musk for misleading and causing financial damage to Tesla car company shareholders. As part of his settlement deal with the US Securities and Exchange Commission (SEC), the South African-born billionaire will resign as the company's chairman within 45 days and pay a 20 million USD fine. He will also not be eligible to be re-elected to the post for next three years.
Here is a recap of what led to this shocking settlement deal.
On August 7 this year, Elon Musk put a tweet, saying he had secured funding to make Tesla a private company and away from its current status as a publicly traded company. According to Musk, each shareholder can either choose to remain with the company or would get a buy out at 420 USD per share. His tweet led to a quick 11 percent rally in the price of Tesla stock as stockholders were impressed with the sudden announcement of the chairman. With a 70 billion USD price tag, this would have been the largest ever private buyout of a public stock company by private entities.
Here are the snapshots of Musk's tweets:
Shareholders could either to sell at 420 or hold shares & go private
Why Musk wanted to take Tesla private
According to Musk's blogs, the aim behind the move was escaping from constant public scrutiny over the operations of his company. The speculation over the company's future had brought high volatility in the price of Tesla stock. As a matter of fact, despite consistent innovation, huge volume of traders have been short selling the company's stock in the last few years, believing its price to be overvalued.
Backing out from his promise
In late August, Musk backed out from the plan of taking the company private, stating that he had changed his mind. The revelation led to the tanking of the Tesla stock. The whole situation that started with Musk's first tweet alarmed the regulators over suspected fraud, and violation of the rules of conduct. Subpoenas were sent to Musk and he was subsequently found guilty of irresponsibly causing damage to investors by revealing extremely crucial company information on social media and backing out from it later on.
Although Musk said that he had secured the promise of potential funding from Saudi Arabia’s sovereign wealth fund and that the information was accurate, the SEC in its lawsuit stated that Musk did not have a concrete deal in place, and so his social media posts were “false and misleading” to investors.
Why Elon Musk was forced to step down as Tesla chairman
![Why Elon Musk was forced to step down as Tesla chairman]()
Reviewed by Prateek Vishwakarma
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October 01, 2018
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