Having been forced to step down from Tesla board by the SEC, Elon Musk taunted the commission before agreeing to pay up.
An indiscreet tweet by Elon Musk has cost the battery-building billionaire US$20 million in fines from the US corporate regulator and has forced him to step down as chairman of his beloved electric-vehicle brand, Tesla.
The famously combative and unpredictable Musk initially engaged a high-powered law team and vowed to fight the US Securities and Exchange Commission (SEC), but then abruptly capitulated and agreed to pay the fine and meet its demands.
Tesla’s share price plunged 14% on September 28 when news hit that Musk had ceded to the SEC, but it quickly bounced back by 17%.
Musk, who reportedly has been working behind the scenes to buy back control of his Tesla corporate empire, openly flagged his intentions to go private in a tweet on August 7 that may go down in history as one of the most expensive social media posts ever.
“Am considering taking Tesla private at $420. Funding secured. Shareholders could either sell at 420 or hold shares & go private.”
Am considering taking Tesla private at $420. Funding secured.
— Elon Musk (@elonmusk) August 7, 2018
That stunning tweet incurred the wrath of the SEC, which declared it was tantamount to fraud, that he was in breach of securities regulations, and that the public disclosure caused financial harm to investors.
While the reference to US$420 indicated a prospective share price, social media commentary ran riot with the suggestion that this was Musk simply being mischievous and the 420 was a cannabis consumption pop-culture reference to Weed Day. (Musk has also, infamously, recently allowed himself to be filmed smoking a joint during an interview, causing further market jitters for Tesla.)
Musk taunts the SEC
Either way, the enormous fine appears to have done little to dent the Musk hubris. He responded publicly on October 1 to his whacking by the SEC with a tweet of a video clip of the 1991 song ‘OPP’, in which the US rappers Naughty By Nature deliver the lines:
“Come on, come on, now let me tell you what it’s all about
When you get down, you can’t go ‘round runnin’ off at the mouth
That’s rule number one in this OPP establishment
You keep your mouth shut and it won’t get back to her or him.”
Naughty by Nature 😉https://t.co/muZdxJWjyZ
— Elon Musk (@elonmusk) October 1, 2018
Musk must now give up his position as chairman of Tesla for three years but is permitted to continue as CEO, and will thus still maintain much of his iron grip on the company. The other SEC demands include the appointment of two additional Tesla board directors independent of Musk – which should make some worried investors happy – and an agreement on stricter oversight of his public disclosures. Much like Donald Trump, someone really needs to take his phone off him, now and then.
The US$20 million fine – a relative drop in the ocean for a man with a net worth of U$19 billion – will reportedly be distributed to compensate those share traders who can prove they suffered financially from Musk’s public disclosure.