Elon Musk’s 20 Million Dollar Joke Taken too Far

Kareem Tabbara, Staff Writer

Everyone knows Elon Musk as the charismatic front man of giant companies like Tesla, or SpaceX. However, he recently was charged $20 million and almost lost his position as CEO of Tesla.

In August 7, 2018, Elon Musk tweeted stating he had enough funds to buy out the majority of Tesla, at $420 a share, and make the company private. Because of this tweet, the Tesla stock climbed to around $380 per share that same day. According to the Daily Mail, Musk said he released the tweet to impress his girlfriend.

However, the SEC exposed Musk, saying that he did not have enough funds to secure Tesla. The SEC (U.S. Securities and Exchange Commission) is an Independent Federal Agency and is responsible to safeguard investors, manage fair and orderly conduct of securities markets, and speed up and maintain capital formation. A security market is a company that holds economic value.

The SEC filed their suit against Musk on September 27, 2018, under 10b-5 of the Exchange Act. This Act was put in place to prevent people from manipulating the market and commit insider trading. In this case, they are pursuing Musk for manipulating the market since his statement caused the Tesla stock to rise. The SEC wants the judge of the case to prevent Musk from serving as an officer or director of a public company.

Musk stated that the lawsuit was an, “unjustified action” and that it left him, “Deeply saddened and disappointed”. Musk is known to be satirical and a jokester during interviews or in his tweets. However, it seems the SEC wanted to make an example of Musk, but it was an expensive example.

Musk could’ve gone to court and fought the SEC but, he took a settlement deal of $20 million, according to CNBC. Musk has a net worth upwards of $19 billion so this may just be a minor setback for him. Nonetheless, the settlement also came with other consequences.

Musk will be allowed to stay CEO of Tesla but must resign his role of chairman of the board within 45 days. He also cannot seek reelection of his position of CEO for another 3 years, according to CNN. The company also decided to designate two sovereign directors to its board and institute a board committee to chaperon Musk’s communications, according to Vox.

If Musk were to resign as CEO of Tesla, the company would surely see some drawbacks and potentially even lose some value in their stocks, as stated by Garrett Nelson, a senior equity analyst at CFRA Research. If the stocks do go down it could in turn harm investors. At the end of the day, Musk learned a valuable lesson which is to not tweet absurd bluffs to impress his girlfriend. However, if anything, Musk can just fall back on The Boring Company and sell more flamethrowers or hats instead of cars.