A tweet in August sent by Elon Musk has cost the entrepreneur dearly.
Elon Musk and his infamous tweet from August has now cost the billionaire $40 million and so much more.
The “420 tweet”, in which CEO Musk teased at plans to take Tesla private, led to the US Securities and Exchange Commission (SEC) charging Musk with securities fraud.
“Am considering taking Tesla private at $420. Funding secured, ” Musk said. “Shareholders could either to sell at 420 or hold shares & go private.”
Obviously, this tweet caused Tesla stock (TSLA) to fluctuate greatly. These volatile movements were further perpetuated by small groups of (TSLA) investors confirming that several meetings did indeed take place wherein Tesla CEO, Elon Musk discussed taking the company private.
If (TSLA) reached $420 a share it would value the innovative automaker at roughly $70 billion, far beyond its current market cap of $45.1 billion.
Allegedly the $420 price target was no more then an “inside joke” between Elon Musk and his girlfriend, musician Grimes. According to reports he used the $420 price target to amuse her.
Musk then emailed Tesla (TSLA) employees, commenting on the volatility:
“As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders. Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term.
Finally, as the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company.”
No matter the reasoning behind a wish to take the automaker private, the way in which Musk made his announcement caused SEC to act.
Regardless of the motivation to take Tesla private the way that Elon Musk chose to announce the intention of the company caused the SEC to act.
Last week, the commission charged Musk with securities fraud over his public tweet, claiming that the executive made “a series of false and misleading tweets” over the company’s future.
Last week the SEC charged Elon Musk with securities fraud over his “420 tweet”, claiming that Musk made “a series of false and misleading tweets” over (TSLA)’s future.
The SEC stated on Thursday (9/27/2018) that “Musk had not discussed specific deal terms with any potential financing partners, and he allegedly knew that the potential transaction was uncertain and subject to numerous contingencies.”
In addition, the tweet “led to significant market disruption,” according to the commission.
Over the weekend, SEC settled with the Tesla CEO, charging Musk $20 million and Tesla a further $20 million.
Over the weekend (9/28 – 9/30) Elon Musk settled with the SEC, charging the Tesla CEO $20 million personally and an additional $20 million to (TSLA) directly.
The SEC said Musk has not admitted or denied the allegations but has agreed to step down as Tesla’s Chairman and will not seek re-election for at least three years.
Tesla will appoint an independent chairman to replace Elon Musk, and will further appoint an additional two directors.
In addition, SEC has insisted on some new measures of control over the CEO in the future through “a new committee of independent directors and additional controls and procedures to oversee Musk’s communications.”
The $40 million fine will be “distributed to harmed investors under a court-approved process,” SEC says.
“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,” said 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.”