Elon Musk could have avoided SEC lawsuit by signing a no-guilt settlement
Musk backed out of the deal at the last minute
By Shawn Knight,
What just happened? Tesla's chief could have skirted the SEC's recently
filed lawsuit but reportedly felt that signing a settlement could have
blemished his reputation. Instead, he is choosing to fight the
allegations, adding even more to his already full plate.
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.
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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