Tesla CEO Elon Musk resigned yesterday as the chairman of the company after the US Securities and Exchange Commission slapped him with a hefty fine of $20 million over his aborted bid to take the company private.

 

The SEC had sued the South African-born billionaire after he reportedly turned down an initial deal at the last minute.

 

As part of the new agreement announced on Saturday settling the SEC’s suit, Musk will resign as Tesla chairman within 45 days, and he won’t be able to be re-elected to the post for three years. He will stay as the company's CEO.

 

Musk and Tesla will each pay a separate $20 million penalty, which will be distributed to harmed investors, and Tesla will appoint two new independent directors to its board. A judge will have to approve the settlement.

 

The SEC's enforcement action brings to a conclusion a saga which began in early August, when Musk announced via Twitter that he had secured enough funding for a massive private buyout of Tesla. The SEC complaint alleged that in doing so, Musk issued "false and misleading" statements, and failed to properly notify regulators of material company events. Under the deal's terms, Musk and Tesla neither admit or deny wrongdoing alleged by regulators.

 

"This matter reaffirms an important principle embodied in our disclosure-based federal securities laws," SEC chairman Jay Clayton said in a statement.

 

"Specifically, when companies and corporate insiders make statements, they must act responsibly, including endeavouring to ensure the statements are not false or misleading and do not omit information a reasonable investor would consider important in making an investment decision," Clayton added.

 

"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," regulators said on Saturday.

 

However, "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," they added.