The Securities and Exchange Commission on Thursday filed a lawsuit against Tesla CEO Elon Musk regarding tweets published in August about taking Tesla private. The suit was nearly avoided entirely but Musk reportedly pulled out of a settlement at the last minute.
Sources familiar with the matter tell CNBC that the deal would have allowed Tesla and Musk to pay a nominal fine. Furthermore, Musk would not have had to admit any guilt in the matter.
Musk’s apprehension reportedly came from the fact that the deal would have barred him as chairman for a period of two years. Tesla, meanwhile, would have been required to appoint two new independent directors.
CNBC said Musk refused to sign the deal because “he felt that by settling he would not be truthful to himself, and he wouldn't have been able to live with the idea that he agreed to accept a settlement and any blemish associated with that.”
Share value in Tesla is down more than 11.6 percent on the day, trading at $271.75 as of this writing.
Am considering taking Tesla private at $420. Funding secured.— Elon Musk (@elonmusk) August 7, 2018
Musk, if you recall, teased on Twitter about taking Tesla private in early August. He specifically said he would consider doing so at $420, adding that funding had already been secured.
In its lawsuit, the SEC said Musk “calculated the $420 price per share based on a 20 percent premium over that day’s closing share price because he thought 20 percent was a “standard premium” in going-private transactions. This calculation resulted in a price of $419, and Musk stated that he rounded the price up to $420 because he had recently learned about the number’s significance in marijuana culture and thought his girlfriend “would find it funny, which admittedly is not a great reason to pick a price.”
As it stands, Musk’s future with Tesla remains unclear. According to Gene Munster, a managing partner of venture capital firm Loup Ventures, there’s about a 25 percent chance Musk remains Tesla’s CEO.
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