Elon Musk pushed Tesla’s board of directors to reject the Securities and Exchange Commission’s settlement, threatening to resign “on the spot” if he didn’t get his way. That’s according to a Tuesday report from James Stewart, who claims that the commission was surprised to see Musk and the board reject a generous offer — which pushed the commission to impose even harsher terms on the settlement.
The commission was investigating an August 7 Twitter post, where Musk claimed he had the “funding secured” to take the company private with a share buyout offer of $420 a piece. It later emerged that Musk made the declaration on the basis of a meeting with the Saudi Arabian sovereign investment fund, which left him with “no question” he could strike a deal. Musk abandoned the plan before the end of the month, citing investor concerns that going private was a bad move.
Stewart, a Pulitzer-winning reporter best known for his account of insider trading Den of Thieves, wrote in the New York Times that the commission originally offered Musk a deal to settle the investigation: a $10 million fine, and a ban from serving as chairman for two years. Musk could continue in his other role as CEO. In a call with directors, Musk threatened to walk away if they didn’t reject the deal and issue a statement supporting him.
The company shared the following statement from the board with Inverse:
Tesla and the board of directors are fully confident in Elon, his integrity, and his leadership of the company, which has resulted in the most successful U.S. auto company in over a century. Our focus remains on the continued ramp of Model 3 production and delivering for our customers, shareholders and employees.
In the aftermath, Tesla stock dropped nearly 14 percent. John Coffee, Columbia Law School professor, told Stewart that Musk “didn’t have a legal leg to stand on,” and that “rejecting such a favorable settlement is proof that he needs monitoring.” Charles Elson, a University of Delaware finance professor, told the Los Angeles Times that the above statement “really was troubling.”
The ultimate settlement was significantly harsher. Musk has to pay a fine of $20 million, plus Tesla itself had to pay $20 million. Musk is now banned from serving as chairman for three years, and his replacement has to be an independent director. Two new independent directors will sit on the board. Musk has 45 days, from the settlement start on Sunday, to resign as chairman.