Tesla’s founder and chief executive, Elon Musk, will step down as the chairman of the Silicon Valley-based company. Musk, being the largest stockholder, holds approximately 22 percent of the company’s shares. He has recently been making irrelevant and unusual public comments and appearances. In his recent controversial tweet, he announced that he had secured funds to take the car company private at $420 a share. The Securities and Exchange Commission sued Musk in Federal court alleging that he misled investors. SEC said in a press release that Musk would step down as Chairman within 45 days and remain ineligible to be re-elected for the next three years. However, Musk will be allowed to stay as the CEO.
Tesla and Musk will separately be paying $20 million as fine to resolve the fraud charges. Steven Peikin, the Co-Director of the Enforcement Division of SEC, said that the resolution was made to prevent further market disruption and harm to Tesla’s shareholders. The SEC also added that Musk and Tesla agreed to the deal without admitting or denying the allegations filed against them. Musk also revealed that the share price $420, which was a nod to marijuana culture, was meant to amuse Grimes, his girlfriend.
Musk’s tweet has raised concerns with investors whether Musk has become sensitive to criticism from short-sellers who had been making bets against him and Tesla. The tweet has also caused Tesla’s stock price to jump by 6% on 7th August leading to notable market disruption. The company’s shares have been hit hard following the issue, and the stock dropped by 14% on Friday losing more than $7 billion in shareholder returns.