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Tesla and Elon Musk settle with SEC: $40M fine, CEO to step down as Chairman

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Two days after the United States Securities and Exchange Commision filed suit against Elon Musk for allegedly misleading investors with his “funding secured” announcement on Twitter about Tesla’s possible privatization at $420 per share, the CEO and the agency have reached a settlement. The settlement’s announcement was posted by the SEC in a press release shortly before 3 p.m. PST on Saturday.

As part of the settlement, Elon Musk would pay a personal fine of $20 million, on top of another $20 million penalty for Tesla Inc. The $40 million in total fines will be distributed to investors that were “harmed” by Elon Musk’s Twitter announcements.

By opting for a settlement, Elon Musk would be allowed to remain as the CEO of Tesla Inc., though he would be required to step down as Chairman of the Board. Musk is given a 45-day period to resign from his position as the Board’s Chairman. Under the terms of the settlement, Musk is also prohibited from serving as Chairman of the Board for at least three years. 

Also resulting from Elon Musk and the SEC’s settlement is the appointment of two new independent board members. Tesla is required to create an independent committee that’s specifically tasked to oversee investor communications as well. Perhaps most notably, settling the case does not require Elon Musk to admit guilt to the SEC’s allegations in its lawsuit.

While being forced out of his place as Chairman of Tesla’s Board of Directors would be a big blow to Elon Musk (considering that he’s held the post for nearly 15 years), agreeing to a settlement with the SEC could very well be the best strategy to adopt at this point. Tesla, after all, is on the verge of reaching new milestones, as the company is expected to break both production and delivery records this Q3. At this point in Tesla’s development, the last thing the company needs is a lawsuit hanging over its Chief Executive’s head. If any, the creation of a committee that oversees investor communications would likely benefit Tesla in the long term. The committee, for one, could prevent similar incidents such as Elon Musk’s “funding secured” fiasco from happening again in the future.

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Following is the SEC’s press release about the settlement regarding its case against Elon Musk.

Washington D.C., Sept. 29, 2018 — The Securities and Exchange Commission announced today that Elon Musk, CEO and Chairman of Silicon Valley-based Tesla, Inc., has agreed to settle the securities fraud charge brought by the SEC against him last week.  The SEC also today charged Tesla with failing to have required disclosure controls and procedures relating to Musk’s tweets, a charge that Tesla has agreed to settle. The settlements, which are subject to court approval, will result in comprehensive corporate governance and other reforms at Tesla—including Musk’s removal as Chairman of the Tesla board—and the payment by Musk and Tesla of financial penalties.

According to the SEC’s complaint against him, 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.  The SEC’s complaint alleged that, 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.  According to the SEC’s complaint, Musk’s misleading tweets caused Tesla’s stock price to jump by over six percent on August 7, and led to significant market disruption.

According to the SEC’s complaint against Tesla, despite notifying the market in 2013 that it intended to use Musk’s Twitter account as a means of announcing material information about Tesla and encouraging investors to review Musk’s tweets, Tesla had no disclosure controls or procedures in place to determine whether Musk’s tweets contained information required to be disclosed in Tesla’s SEC filings.  Nor did it have sufficient processes in place to that Musk’s tweets were accurate or complete.

Musk and Tesla have agreed to settle the charges against them without admitting or denying the SEC’s allegations.  Among other relief, the settlements require that:

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  • Musk will step down as Tesla’s Chairman and be replaced by an independent Chairman.  Musk will be ineligible to be re-elected Chairman for three years;
  • Tesla will appoint a total of two new independent directors to its board;
  • Tesla will establish a new committee of independent directors and put in place additional controls and procedures to oversee Musk’s communications;
  • Musk and Tesla will each pay a separate $20 million penalty.  The $40 million in penalties will be distributed to harmed investors under a court-approved process.

“The total package of remedies and relief announced today are specifically designed to address the misconduct at issue by strengthening Tesla’s corporate governance and oversight in order to protect investors,” said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division.

“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,” added 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.”

The SEC’s investigation was conducted by Walker Newell, Brent Smyth, and Barrett Atwood and supervised by Steven Buchholz, Erin Schneider, and Jina Choi in the San Francisco Regional Office and Cheryl Crumpton in the SEC’s Home Office.

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Simon is an experienced automotive reporter with a passion for electric cars and clean energy. Fascinated by the world envisioned by Elon Musk, he hopes to make it to Mars (at least as a tourist) someday. For stories or tips--or even to just say a simple hello--send a message to his email, simon@teslarati.com or his handle on X, @ResidentSponge.

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Investor's Corner

Tesla Board member and Airbnb co-founder loads up on TSLA ahead of robotaxi launch

Tesla CEO Elon Musk gave a nod of appreciation for the Tesla Board member’s purchase.

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(Credit: Tesla)

Tesla Board member and Airbnb Co-Founder Joe Gebbia has loaded up on TSLA stock (NASDAQ:TSLA). The Board member’s purchase comes just over a month before Tesla is expected to launch an initial robotaxi service in Austin, Texas.

Tesla CEO Elon Musk gave a nod of appreciation for the Tesla Board member in a post on social media.

The TSLA Purchase

As could be seen in a Form 4 submitted to the United States Securities and Exchange Commission (SEC) on Monday, Gebbia purchased about $1.02 million worth of TSLA stock. This was comprised of 4,000 TSLA shares at an average price of $256.308 per share.

Interestingly enough, Gebbia’s purchase represents the first time an insider has purchased TSLA stock in about five years. CEO Elon Musk, in response to a post on social media platform X about the Tesla Board member’s TSLA purchase, gave a nod of appreciation for Gebbia. “Joe rocks,” Musk wrote in his post on X.

Gebbia has served on Tesla’s Board as an independent director since 2022, and he is also a known friend of Elon Musk. He even joined the Trump Administration’s Department of Government Efficiency (DOGE) to help the government optimize its processes.

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Just a Few Weeks Before Robotaxi

The timing of Gebbia’s TSLA stock purchase is quite interesting as the company is expected to launch a dedicated roboatxi service this June in Austin. A recent report from Insider, citing sources reportedly familiar with the matter, claimed that Tesla currently has 300 test operators driving robotaxis around Austin city streets. The publication’s sources also noted that Tesla has an internal deadline of June 1 for the robotaxi service’s rollout, but even a launch near the end of the month would be impressive.

During the Q1 2025 earnings call, Elon Musk explained that the robotaxi service that would be launched in June will feature autonomous rides in Model Y units. He also noted that the robotaxi service would see an expansion to other cities by the end of 2025. “The Teslas that will be fully autonomous in June in Austin are probably Model Ys. So, that is currently on track to be able to do paid rides fully autonomously in Austin in June and then to be in many other cities in the US by the end of this year,” Musk stated. 

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Tesla hints at ‘Model 2’ & next-gen EV designs

Tesla’s Q1 2025 update confirms new models this year, with production tied to existing factory lines. Could it be time for the Model 2 debut?

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(Credit: Tesla)

During its Q1 2025 earnings call, Tesla executives hinted at the much-rumored “Model 2” and other next-gen EV designs.

Tesla slightly addressed whether or not it will be pushing forward with the debut of new models later this year in its latest earnings call. The company’s product development executive, Lars Moravy, shared some details about Tesla’s design process and the upcoming affordable models.

“We’re still planning to release models this year. As with all launches, we’re working through, like, the last minute issues that pop up. We’re knocking them down one by one. At this point, I would say that the ramp might be a little slower than we had hoped initially…But there’s nothing that’s blocking us from starting production within the next, within the timeline laid out in the opening remarks.

“And I will say it’s important to emphasize that, as we’ve said all along, the full utilization of our factories is the primary goal for these new products. And so the flexibility of what we can do within the form factor and, you know, the design of it is really limited to what we can do on our existing lines rather than building new ones. But we’ve been targeting the low cost of ownership. Monthly payment is the biggest differentiator for our vehicles, and that’s why we’re focused on bringing these new models with the, you know, the lowest price, to the market, within the constraints I just highlighted.”

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In January, Tesla’s Chief Financial Officer Vaibhav Taneja teased several new product introductions for this year. There is at least one product that most Tesla supporters and investors are hoping to see: the company’s affordable vehicles, which have been dubbed by the EV community as the “Model 2” or “Model Q.”

Before Tesla’s Robotaxi event last year, many speculated that the company would also unveil its affordable next-gen vehicle. Gene Munster from Deepwater had expected Tesla to release a stripped-down version of the Model 3 as its affordable vehicle during the Robotaxi event. In the end, Tesla unveiled its Robotaxi vehicle and its Robovan design.

It’s been a while since the Robotaxi event, and Tesla has kept mum about its affordable vehicle. Considering its Q1 2025 performance, TSLA investors look forward to catalysts that could boost the stock.

The “Model 2” has been labeled a potential catalyst for Tesla. As such, TSLA investors and supporters have been itching for news about the new affordable vehicle. The main questions surrounding the “Model 2” revolve around its design and price. Based on Moravy’s statement, the “Model 2’s” design will heavily depend on Tesla’s current assembly lines and supply chain structures.

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Tesla regains Piper Sandler’s confidence with Robotaxi plans & Q1 Results

Piper Sandler says Tesla delivered the best-case scenario for bulls. $TSLA has catalysts ahead to silence the bears.

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tesla-model-y-delivery
(Credit: Tesla)

Tesla gained Piper Sandler analyst Alexander Potter’s confidence following its Q1 2025 earnings call. Piper Sandler reaffirmed its Overweight rating and $400 TSLA price target, signaling optimism for the company’s robotaxi and affordable vehicle launches expected this year. The firm’s stance reflects Tesla’s resilience amid market challenges.

Despite expectations of weak Q1 financials, Tesla’s stock edged up in after-hours trading, defying skepticism. Piper Sandler’s Alexander Potter noted that the results met the hopes of Tesla supporters, particularly as the company held firm on its timelines. Potter emphasized that anticipation for robotaxi details and new vehicle launches should keep critics at bay, supporting the $400 target.

“In our preview last week, we predicted that (at best) Q1 would be a non-event. With the stock trading up slightly in the after-hours session, it appears our best-case scenario has materialized. Considering generally weak Q1 financials, we think this is the best result that TSLA bulls could’ve reasonably hoped for.

“In our view, the most important Q1 takeaway is this: Tesla didn’t hedge expectations re: launching Robotaxis or lower-priced vehicles in 1H25. With <2 months until the end of June, investors can look forward to some interesting catalysts in the weeks ahead. In our view, this alone should be enough to keep the bears at bay, at least until we have a better idea re: the details of Tesla’s new products, as well as the scale/scope of the Robotaxi launch,” wrote Potter.

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Wedbush Securities’ Dan Ives, a longtime TSLA bull, echoed Potter’s optimism for Tesla. Ives raised his price target for Tesla stock from $315 to $350 with a BUY rating. His Tesla upgrade came after Elon Musk’s announcement during the Q1 earnings call that he would reduce his involvement with DOGE, signaling a sharper focus on Tesla.

Tesla’s steady Q1 performance and unwavering commitment to its 2025 roadmap, including the Robotaxi launch and lower-priced models, bolster investor confidence. Piper Sandler’s analysis underscores Tesla’s ability to navigate a competitive electric vehicle market while advancing its technological edge. The upcoming Robotaxi launch and affordable vehicle introductions are pivotal, with analysts expecting these initiatives to drive stock value through 2025.

As Tesla prepares for these milestones, its stock movement reflects market trust in Musk’s vision. With Piper Sandler and Wedbush reaffirming bullish outlooks, Tesla’s strategic moves will remain under close scrutiny, positioning the company to capitalize on its innovation pipeline in a dynamic industry landscape.

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